US Fed: "Rate Cuts Inappropriate Until Inflation 2% Confidence Achieved" (Update)

"US Economy and Employment Still Strong"
Draws the Line on March Rate Cut Expectations

The U.S. Federal Reserve (Fed) held the benchmark interest rate steady as expected. However, it stated that since the U.S. economy and employment remain robust, it is not appropriate to rush into lowering the benchmark rate, drawing a line under expectations for an early rate cut in March.

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On the 31st (local time), the Fed announced after the Federal Open Market Committee (FOMC) regular meeting that it would unanimously keep the federal funds rate at the existing range of 5.25% to 5.5%. This marks the fourth consecutive hold following decisions in September, November, and December of last year. The interest rate gap with South Korea was maintained at 2 percentage points at the upper bound.

In the policy statement, the Fed assessed, "Recent indicators show that economic activity is expanding at a solid pace," adding, "Job gains have slowed since early last year but remain strong, and the unemployment rate remains low." It also analyzed, "Inflation has eased over the past year but remains elevated."

Furthermore, the Fed stated, "It is not appropriate to reduce the target range until there is greater confidence that inflation is moving sustainably toward 2%," and "The Committee is paying close attention to inflation risks." Although some in the market expect a rate cut in March, this indicates that the Fed will not hasten a shift in monetary policy until further inflation easing is confirmed.

The Fed said, "The Committee believes that the balance of risks to the achievement of employment and inflation goals has improved," and "When adjusting the target range for the federal funds rate, it will carefully assess incoming data, evolving outlooks, and the balance of risks."

However, the possibility of future rate cuts remains open. In the policy statement released that day, the phrase "the extent of any additional policy firming" was removed. This phrase had been included in previous statements, signaling the Fed's willingness to raise rates further over the past year. Its removal suggests that the Fed is, in principle, leaving the door open to potential rate cuts.

As the Fed ruled out an early rate cut in March, the New York stock market is falling across the board. The Dow Jones Industrial Average, composed of blue-chip stocks, was down 0.15% compared to the previous close as of 2:15 p.m. The S&P 500 and Nasdaq indices were also falling by 0.95% and 1.45%, respectively.

This content was produced with the assistance of AI translation services.