Federal Reserve leaves key interest rate unchanged at 5.50 percent

Despite falling inflation, the Fed is still not turning the interest rate screw and is leaving the key interest rate unchanged at 5.50 percent. US monetary authorities announced this in a press release yesterday.

The top monetary authorities are thus in line with market analysts' forecasts. In the run-up to the announcement, 99 percent of market participants surveyed had assumed an unchanged base rate. The U.S. central bank appears to want to continue monitoring the economic situation in the U.S. for the time being.

Despite the recent drop in the U.S. inflation rate, which fell below the forecast of 3.4 percent in May at 3.3 percent, the Federal Reserve is leaving the key interest rate at its current level. This means that since July 2023, interest rates will remain at a constant level, well above the inflation rate.

At the last press conference on May 1, Federal Reserve Chairman Jerome Powell had already indicated that he planned to cut the key interest rate in the future, but only once the long-term inflation problem was under control. Given ongoing global conflicts and a still relatively strong U.S. economy, monetary authorities believe it is too early to cut interest rates.

In doing so, the Federal Reserve Bank deviated from the policy of the European Central Bank (ECB), which cut the key interest rate for Europe by 25 basis points in the previous week.