US Fed Keeps Interest Rate Unchanged for Sixth Time Amid High Inflation

US Fed Meeting: The US Federal Reserve's decision to maintain interest rates at a 23-year high reflects concerns about stubborn inflationary pressures. Despite indications of easing inflation, Fed Chair Jerome Powell after the Federal Open Market Committee meeting emphasised that inflation remains "still too high" and hinted that rate cuts aren't imminent until there's greater confidence in price growth moving towards the 2 per cent target.

“It is likely that gaining such greater confidence will take longer than previously expected,” Powell told a news conference after the end of a two-day policy meeting. “We are prepared to maintain the current target federal funds rate for as long as appropriate.”

Powell highlighted the uncertainty surrounding the path forward and indicated that future rate adjustments would be data-dependent. While the Fed's preferred inflation index has decreased from its peak in 2022, it still exceeds the 2 per cent target, standing at 2.7 per cent.

Although Powell downplayed the likelihood of a rate hike at the next policy meeting in June, the market response was mixed. 

“I think it’s unlikely that the next policy rate move will be a hike,” Powell added. 

Stocks Movement 

Initially, US stocks rallied following the announcement but ended mostly down as investors absorbed the decision. The S&P 500 surged before closing slightly lower, while London's FTSE 100 also dipped. In Asia, Japan's Nikkei 225 experienced early losses, while markets in Hong Kong and Shanghai were closed for a holiday.