Send to

US Fed keeps key rate unchanged for 5th straight time, signals 3 rate cuts this year

March 21, 2024 - 09:17 By Yonhap
US Federal Reserve Chair Jerome Powell holds a press conference in Washington on Wednesday (Reuters-Yonhap)

The US Federal Reserve on Wednesday held its benchmark lending rate steady for a fifth consecutive time and signaled that it could lower the rate three times this year in line with policymakers' previous projections.

After the two-day Federal Open Market Committee meeting, the central bank announced its decision to maintain the rate in the 5.25 to 5.50 percent range.

FOMC members' latest median economic projections showed that the federal funds rate would be cut to 4.6 percent at the end of this year. The forecast signaled the possibility of three quarter-percentage-point cuts this year.

"Inflation has eased substantially and the labor market has remained strong. And that is very good news," Fed Chair Jerome Powell told a press briefing.

"But Inflation is still too high. Ongoing progress in bringing it down is not assured, and the path forward is uncertain. We are fully committed to returning inflation to our 2 percent goal," he added.

He struck a cautious note when asked to comment on the timing of a rate cut.

"We are making decisions meeting by meeting, and we didn't make any decisions about future meetings today," he said. "Those are going to depend on our ongoing assessment of incoming data, the evolving outlook and a balance of risks."

Powell highlighted difficulties in making monetary policy decisions.

"The risks are really two sided. We are in a situation where if we ease too much or too soon, we could see inflation back. If we ease too late, we can do unnecessary harm to employment and people's working lives," he said.

"Fortunately, with the economy growing, with the labor market stronger, with inflation coming down, we can approach that question carefully."

The Fed has frozen the rate since September following a July FOMC decision to raise the rate by a quarter percentage point to the current level.

In March 2022, the Fed launched a rate-hiking campaign to bring down inflation that hit a 40-year high in July of the same year. The Fed is expected to start its cycle of rate cuts when inflation is convincingly on a sustainable track toward its inflation target.

The latest Fed rate freeze put the gap between the key rates of South Korea and the United States at up to 2 percentage points. (Yonhap)