Fed keeps interest rates unchanged for fourth straight meeting

On January 31, as expected by the market, the US Federal Reserve (Fed) decided to keep interest rates unchanged in its fourth consecutive policy meeting.

According to a VNA reporter in Washington, the Fed has yet to signal when it will cut interest rates in 2024. Fed officials said they will continue to monitor market inflation developments to adjust policy.

At its March 2024 policy meeting, the Fed will have some more information on the Consumer Price Index (CPI) for January and February, as well as data on the US economy's Personal Consumption Expenditures (PCE) - the central bank's preferred inflation gauge.

In a statement released after the meeting, Fed Chairman Jerome Powell emphasized that by keeping interest rates steady, risks will shift to a more balanced state. The Fed's decision also eliminated the possibility of raising interest rates, but remained cautious about the timing of the bank's rate cut.

Economists said the above assessments showed remarkable changes in the Fed's views and were a signal that lending costs may not rise further.

In the context of the US economy just receiving some positive news, many forecasts about the Fed's policy direction at this week's meeting have been made.

“The Fed is likely to keep its target for a rate cut in March, but it has not signaled a decision,” said Goldman Sachs economist David Mericle. “Chairman Powell also noted that Fed officials will base their decision on inflation data for the next two months, before the March 2024 meeting.”

In a recent Reuters survey, 86 of 123 economists polled predicted the Fed would keep interest rates unchanged at its policy meeting in January 2024. The first cut could come in the second quarter of 2024, most likely in June.

CME Group's interest rate tracker shows investors are still betting on a more than 47% chance that the Fed's first rate cut will be announced in March. However, that rate has dropped sharply compared to the more than 70% result nearly a month ago.

According to experts, these comments were made in the context of the world's largest economy continuously receiving positive news in the past few days. The US gross domestic product (GDP) in the fourth quarter of 2023 grew by 3.3%, much higher than forecast.

Meanwhile, PCE rose just 2.9% on an annual basis, lower than forecast. Notably, among the inflation indicators, goods prices fell 0.2% while services prices rose 0.3%, reversing the trend when inflation began to spike, suggesting that demand for goods and supply chains after the pandemic are gradually returning to normal.