Washington, June 18, 2024 - The U.S. Federal Reserve (Fed) is set to announce its decision on the federal funds rate today. The current rate in the world's largest economy is in a range of 4.25% to 4.5%.
Most analysts anticipate that the central bank will keep the key interest rate unchanged, despite ongoing criticism. Following a period of high interest rates to combat inflation, there have been two rate cuts in the U.S. in 2024, but none yet this year.
The Fed's decision is expected to be announced at 20:00 (CEST). The federal funds rate is the primary tool the central bank uses to manage inflation and maintain low unemployment.
The interest rate influences the rates at which commercial banks can borrow from the central bank. This, in turn, affects the fees paid by consumers and businesses.
For instance, if the Fed lowers the interest rate, loans from banks would become cheaper. This would impact mortgages, car loans, corporate financing, and credit card interest rates.
Cheaper loans stimulate the economy by enabling Americans to spend more and making credit-financed investments more affordable.
The Fed is independent, and politicians do not have direct influence over interest rate decisions. However, politicians still voice their opinions. Former US President Donald Trump has been advocating for lower interest rates to boost the economy.
The Fed is unlikely to cut rates due to several factors. The inflation rate is near its target of 2%, and the labor market remains strong.
Uncertainty about the economic outlook, especially due to potential trade policies, also plays a role. Geopolitical factors, such as the conflict between Iran and Israel, could also affect the Fed's considerations.
The Fed will also release new forecasts for economic development, inflation, and expected interest rate cuts today. In March, the Fed lowered its economic growth forecast.
