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• US Fed kept interest rates unchanged at 5.25% to 5.5%.
• Despite this decision, the Fed signalled its anticipation of cutting rates three times within the year.
• US Fed chair suggested that the central bank may initiate rate cuts in the near future

Following a two-day meeting, the US Federal Reserve on Wednesday announced that interest rates would remain unchanged at 5.25% to 5.5%, a level maintained since July.

Despite this decision, the Fed signaled its anticipation of cutting rates three times within the year.

US interest rate

During its latest meeting, the Federal Reserve kept the target range for its influential interest rate at 5.25%-5.5%, the highest level in over two decades.

Despite expectations of potential rate cuts by year-end, officials remain vigilant, assessing whether recent hikes have sufficiently addressed inflationary pressures.

What did Fed Chair say?

Fed Chairman Jerome Powell emphasised the need for prudence, highlighting the favorable economic conditions, including robust growth and a resilient labour market, alongside a gradual decline in inflation.

However, Powell stressed the importance of continued monitoring of economic data to gauge the necessity and timing of future rate adjustments.

He has suggested that the central bank may initiate rate cuts in the near future, following a series of hikes aimed at addressing a significant surge in prices sparked by the Covid pandemic.

US Fed’s global impact 

The Fed’s decision holds global significance as countries grapple with similar economic trade-offs amid rising inflationary pressures.

Despite concerns over the potential adverse effects of prolonged high interest rates, the world’s largest economy has shown resilience, surpassing growth expectations.

Economic forecasts following the meeting revealed an upward revision, with officials anticipating a 2.1% growth rate for the US economy in 2024, a marked improvement from earlier projections.

Inflation forecasts suggest a decline to 2.4% by year-end, edging closer to the Fed’s 2% target rate.

What US Fed’s move means for emerging markets?

While the US economy’s strength is commendable, concerns arise regarding its potential impact on emerging markets.

Analysts say sustained high-interest rates in the US could lead to reduced foreign investment in emerging economies, prompting central banks in these regions to raise their rates to compete.

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