Fed announces June rate decision

All eyes were on the central bank ahead of its much-anticipated call

Fed announces June rate decision

The Federal Reserve has held its key interest rate unchanged, opting against a cut as it continues to weigh up whether economic indicators are trending in the right direction.

The central bank said on Wednesday that it was keeping its federal funds rate steady between 5.25% to 5.5%, the seventh consecutive decision that has seen its trendsetting interest rate land in that range and the sixth time in a row it has neither risen nor fallen.

In its statement, the Fed said while risks to its employment and inflation goals had progressed toward “better balance” during the past 12 months, the economic outlook remained uncertain – and said it did not expect a cut until it had “gained greater confidence that inflation is moving sustainably toward 2%.”

The decision arrives even as inflation showed signs of moderating, with Labor Department data released this morning showing that the consumer price index (CPI) increased by 3.3% in May – a slower pace than the prior month.

The monthly reading, meanwhile, was unchanged, posting a cooler-than-expected performance between April and May. Still, today’s Fed decision comes as little surprise, with markets having scaled back expectations of rate cuts until at least after the summer thanks to a still-strong economy and persistent inflation.

First American Financial Corporation’s deputy chief economist Odeta Kushi said prior to the announcement that investors were “overwhelmingly expecting” rates to remain unchanged in June, with the likelihood of a September cut hovering around the 50-50 mark.

Kushi said factors that would influence the Fed’s outlook for the rest of the year included “inflation, and the factors that drive inflation” including the labor market’s performance and pace of economic activity.

The Fed’s next decision on interest rates is due to arrive at the end of next month (July 30-31).

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