The US Federal Reserve kept its policy rate unchanged, maintaining the target range at 3.5 % to 3.75 %. The number of votes on the Federal Open Market Committee that favor a potential rate cut has dropped to just one, a sharp decline from the several votes in January.
When asked about the economic outlook, the Fed was less optimistic. At the start of the year it had described the labour market as “stabilising” but now it sees a sideways trend with no clear improvement. A new concern is the situation in the Middle East. The committee said the impact on the US economy is “unknown” and that it is monitoring the risks “attentively”.
This means the chances of rate cuts are currently lower, but in the medium term, if inflation rises sharply, the Fed could be forced to use its most unpopular rate hikes to intervene.
