The American Federal Reserve (Fed) on Wednesday kept its rates unchanged, which remain at the highest level in more than twenty years, but it maintains the plan to reduce the cost of credit three times this year.
Overnight rates remain between 5.25% and 5.50%, the central bank announced in a press release, after a unanimous decision by the members of the Monetary Committee (FOMC).
The members of the Fed, who significantly raised their projection for GDP (gross domestic product) growth in the United States to 2.1% this year, instead of 1.4% previously, still anticipate three rate cuts. a quarter of a percentage point in 2024, an election year.
For 2025, however, the Committee is less optimistic, forecasting only three other rate cuts to bring them down to 3.9%, instead of four previously projected.
The markets expected this status quo.
Wall Street, which was in a timid decline in the first part of the session, turned green when traders were reassured by the prospects of rate cuts intended to support the economy once inflation is brought under control.
The Dow Jones gained 0.72% around 8:00 p.m. GMT and the Nasdaq almost 1%.
Jerome Powell, the president of the Fed, estimated during a press conference that inflation remained
“still high”
(at 3.2% according to the CPI index) but he reiterated that he was convinced that it would reach
“ over time”
to the 2% objective.
Read alsoUnited States: the FED maintains its rates, does not yet see a reduction
“We are firmly committed to reducing inflation to 2% over time. This is our goal and we will achieve this goal. The markets believe that we will succeed and we must believe it
,” he insisted.
Earlier, the Fed boss also insisted on
the “uncertainty”
of success in this area.
In its press release, almost identical to that of the previous meeting in January, the Federal Reserve judges the American economy
“solid”
, with
“strong employment gains”
, while the unemployment rate remains at 3.9%. .
Strong growth in the job market is not in itself
“a reason for concern about inflation
,” assured Jerome Powell, indicating that wage growth had calmed.
In its new economic forecasts, the Fed anticipates, as it did three months ago in its latest projections, inflation at 2.4% in 2024, which will have difficulty falling below its current level, according to the PCE index.
Decrease in the number of assets
The unemployment rate will increase less than feared, to 4% this year and 4.1% next year.
The Committee reiterates that
it “does not expect that it will be appropriate to lower the rate target before being more confident in the sustainable trajectory of inflation towards the 2% objective”
.
To curb high inflation born from massive monetary support provided after the global health and economic crisis caused by the Covid 19 epidemic, the American central bank raised its rates by 5 points from March 2022 to July 2023, an unprecedented rate, bringing them up to 5.25%-5.50%.
The Fed has thus managed to reduce inflation by two thirds since its peak at 9.1% in June 2022, without causing a recession so far, hoping to conclude with a
“soft landing”
by taming inflation without creating too much unemployment.
In January, it fell over one year, to 2.4% against 2.6%, according to the PCE index, the Fed's favorite measure, but accelerated over one month, to 0.3% against 0.1%. .
Jerome Powell also indicated that the Fed would
“very soon”
slow down the reduction in the volume of its assets on its balance sheet until it only kept Treasury bills in these reserves and no longer also mortgage securities.
These securities sales which reduced the Fed's portfolio by 1,500 billion dollars were another tool for tightening monetary policy since the powerful buyer of bonds that was the Fed will take a step back.