Federal Reserve Leaves Interest Rates Alone, Plans to Slow Down Inflation

 The US Federal Reserve's Federal Open Market Committee (FOMC) concluded its fourth policy-setting meeting of the year on June 12, unanimously deciding to maintain the target range for the federal funds rate at 5.25% to 5.5%. The decision was made after considering incoming data, the evolving outlook, and the balance of risks.

The committee indicated that it does not expect to reduce the target range until it gains greater confidence that inflation is moving sustainably towards its 2% objective. Additionally, the Fed announced plans to continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities. The central bank is committed to returning inflation to its 2% target

Fed Officials Adjust Rate Cut Expectations

In 2023, inflation gradually slowed down, leading Federal Reserve officials to anticipate three interest rate cuts in 2024. However, the early 2024 inflation data showed a surprising persistence of price increases, prompting policymakers to reconsider their plans for rate cuts.

Fresh Data Reveals Cooling Inflation

Recent Consumer Price Index (CPI) data released on Wednesday confirmed that the initial inflation stickiness in 2024 was merely a temporary blip. Inflation rates cooled significantly in May, indicating a return to the downward trend.

Adjusted Rate Cut Expectations

Despite this shift, the Fed's latest forecasts suggest that they will only lower interest rates once, to 5.1%, by the end of 2024. The exact timing of these rate cuts remains unclear, as officials have not provided a specific timeline. The Fed will meet four more times this year: in July, September, November, and December.

 

 

Indian Markets Reach New Highs, But Caution Prevails

 

The Indian stock markets continued their strong performance, with the Nifty closing at a new all-time high. The Sensex also gained around 150 points on the day. However, the market's momentum was tempered by concerns over expensive stock valuations. Investors were also awaiting key economic data, such as the latest retail inflation numbers, as well as the outcome of the Federal Reserve's policy meeting. Despite the overall positive sentiment, the presence of these factors led to a more cautious approach among market participants.