US Fed Holds Benchmark Interest Rate Steady for 6th Consecutive Time... "Insufficient Progress on Inflation"

Slower Pace of Quantitative Tightening from June
Monthly Treasury Repayment Limit Reduced from $60 Billion to $25 Billion

The U.S. Federal Reserve (Fed) has, as expected, kept the benchmark interest rate unchanged for the sixth consecutive time. It noted that there has been no progress in recent months toward slowing inflation to the target rate of 2%. It also indicated plans to slow the pace of quantitative tightening starting in June.

On the 1st (local time), following the Federal Open Market Committee (FOMC) regular meeting, the Fed announced in its policy statement that it would maintain the federal funds rate at the existing range of 5.25% to 5.5%. This marks the sixth consecutive hold since last September, November, December, and this January and March. As a result, the interest rate gap with South Korea remains at 2 percentage points at the upper bound.

In the policy statement, the Fed said, "Recent indicators suggest that economic activity continues to expand at a solid pace," adding, "Job gains remain strong, and the unemployment rate is low. Inflation has eased over the past year but remains elevated."

In this policy statement, the Fed newly included language indicating that the slowdown in inflation has been insufficient. The Fed explained, "There has been insufficient additional progress in recent months toward slowing inflation to the 2% target."

The Fed stated, "In considering adjustments to the target range for the federal funds rate, we will carefully assess incoming data, evolving outlooks, and the balance of risks," and added, "It is not appropriate to reduce the target range until we have greater confidence that inflation is moving sustainably toward 2%."

Additionally, the Fed hinted at plans to slow the pace of quantitative tightening, also known as balance sheet reduction. Starting in June, it plans to reduce the monthly Treasury redemption cap from $60 billion to $25 billion, thereby slowing the pace of securities reduction. The monthly cap on agency debt and mortgage-backed securities (MBS) redemptions will remain at $35 billion, and any amounts exceeding the cap will be reinvested in Treasuries. Previously, since June 2022, the Fed has been reducing its asset size by not reinvesting $60 billion in Treasuries and $35 billion in MBS monthly.

Following the Fed's decision to hold the benchmark interest rate steady, the New York stock market has risen. The Dow Jones Industrial Average, composed of blue-chip stocks, was up 0.63% as of 2:29 p.m., extending its gains. The S&P 500 index rose 0.18%, and the Nasdaq index increased 0.33%, reversing into positive territory.

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