The Fed leaves rates unchanged, provides for more inflation and less growth: « US economy is strong but high uncertainty »
« The uncertainty about economic perspectives has increased », reads the central bank declaration, which still plans to cut its interest rates twice this year
The Fed as expected has left Interest rates unchanged. For the second consecutive time, the American central bank has left the Fed Funds Target at 4.25%-4.50%. Federal Reserve estimates that « Uncertainty » is « increased » For the largest world economy, two months after Donald Trump's return to the White House. Communication shows that his officials have less confidence in the health of the American economy. « The US economy is overall strong, but the data indicate a high economic uncertainty », The president of the Federal Reserve said Jerome Powell in the press conference after the decision on rates.
The effect of duties
« Inflation started to climb. We think it is partly an answer to the duties and that there can be a delay in further progress During this year, « added Powell. «Too soon to say whether this extra inflation is transitory or not. I think it will also depend on the anchoring of inflation expectations ». On the return of inflation to the objective value (2%), he specified: « We were making progress, but I think that a little delay will be created with the duties. » The number one of the Fed explained that the prices increased on the washing machines, on which there are duties, but also on the dryers, who instead are not subjected to duties. « So simply the producers go behind the mass and raise prices, » he highlighted.
Brakes growth and inflation returns to run
According to the first update from December of the economic projections, the FOMC estimates a much less sustained growth of GDP equal to +1.7% at the end of the year (compared to the 2.1% previously expected). Also provides an acceleration of inflation to 2.7% (against 2.5% of December). And raises slightly increased the unemployment rate to 4.4%, compared to the previous 4.3%. The only constant in the forecasts: the members of the Board of the Usa Central Bank still expect the monetary institute to decide two cuts of the rates (one quarter of point each) this year. In this regard, Powell stressed: « We must not be in a hurry, we can afford to wait for more clarity », on the economic effects of the policies of the new US administration, before changing the rates.
