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The Fed maintains rates and gives the ECB the initiative to reverse monetary restriction

The Fed gives the ECB the initiative to begin reversing the restrictive monetary policy in June.

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The Fed maintains rates and gives the ECB the initiative to reverse monetary restriction

The Fed gives the ECB the initiative to begin reversing the restrictive monetary policy in June

MADRID, 1 May. (EUROPA PRESS) -

The Federal Open Market Committee (FOMC) of the United States Federal Reserve (Fed) has decided to maintain interest rates in the target range of 5.25% to 5.5% for the sixth consecutive meeting. , at maximum levels since January 2001, as reported by the institution this Wednesday, warning of the absence of substantial progress towards its inflation objective.

"The Committee decided to maintain the target range for the federal rate between 5.25% and 5.5%," the Fed's governing body announced, noting that "when considering any adjustment to the target range for the rate, "The Committee will carefully assess the incoming data, the evolving outlook and the balance of risks."

The Committee has also advised that it does not expect it to be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably towards 2%.

In this sense, the members of the Fed Committee highlight that recent indicators suggest that economic activity has continued to expand at a solid pace and employment growth has remained strong and the unemployment rate is falling, while inflation, at Despite having decreased last year, it remains high.

"In recent months, there has been a lack of greater progress towards the 2% inflation objective," the Committee warned in its statement, where it points out that the risks to achieving its double goal of employment and inflation have moved towards a better balance over the past year, although the economic outlook is uncertain and the Committee remains very attentive to inflation risks.

In its statement, the Fed Committee has stressed that in assessing the appropriate monetary policy stance it will continue to monitor the implications of incoming information for the economic outlook, adding that it would be prepared to adjust the monetary policy stance as appropriate if any risks that may prevent the achievement of objectives.

To address the escalating cost of living, the US central bank, led by Jerome Powell, raised interest rates eleven consecutive times between March 2022 and July 2023.

Last week, the US Department of Commerce's Bureau of Economic Analysis reported that the personal consumption expenditure price index, the Fed's preferred statistic for monitoring inflation, stood at 2.7%. year-on-year in the month of March, two tenths more than in February.

For its part, the US gross domestic product (GDP) registered an expansion of 0.4% in the first quarter of the year, half of the 0.8% growth in the fourth quarter of 2023, according to the first estimate published by the Bureau of Economic Analysis of the Department of Commerce. In annualized figures, the US economy between January and March advanced 1.6% compared to 3.4% in the previous three months.

With its decision this Wednesday to maintain rates, the Fed leaves the European Central Bank (ECB) free to take the initiative in reversing the monetary cycle, after the 'guardian of the euro' has expressed its willingness to undertake a first rate cut in June if there are no surprises in incoming data.

In this sense, the Governing Council of the ECB plans to meet again to discuss the monetary policy of the eurozone on June 6, while the Federal Open Market Committee of the Fed will not do so until June 12.

FED BALANCE

On the other hand, the Fed Committee has reported that it will continue to reduce its holdings of Treasury securities and agency debt, as well as agency mortgage-backed securities.

In this sense, starting next June, the Committee will slow down the rate of decrease in its securities holdings by reducing the monthly redemption limit of Treasury securities from 60,000 million dollars (56,085 million euros) to 25,000 million dollars. (23,369 million euros).

For its part, the Committee will maintain the monthly repayment limit of agency debt and agency mortgage-backed securities at $35 billion (€32,717 million) and will reinvest any principal payment that exceeds this limit in Treasury securities.