Fed Sticks to High Interest Rates Amid Inflation Concerns, Leaving Markets Fluctuating
Due to ongoing concerns about inflation, the US Federal Reserve decided to keep interest rates at a 23-year high. The central bank announced that the benchmark lending rate would remain at 5.25-5.50 percent, citing economic reports that showed inflation was not decreasing as quickly as hoped.
Fed Chair Jerome Powell stated that inflation was still too high and that rate cuts would not be considered until there was greater confidence that price growth was moving towards the 2 percent target. Powell emphasized that the Fed was prepared to keep the current interest rate for as long as necessary.
Despite some cooling in the Fed’s preferred inflation index from its peak in 2022, inflation remains above the target at 2.7 percent. According to Powell, a rate hike at the next policy meeting in June was unlikely, leading to a mixed reaction in the stock market.
US stocks initially rallied in response to the announcement but ended mostly down as investors processed the news. The S&P 500 saw a significant increase before closing with a slight decrease, while international markets like London’s FTSE 100 and Japan’s Nikkei 225 also experienced fluctuations in response to the Fed’s decision.
