The US Federal Reserve‘s decision to maintain its benchmark interest rates at 5.25% – 5.50% during the recent FOMC meeting aligns with market expectations. This marks the seventh consecutive meeting where the Fed has opted to keep rates unchanged. The decision reflects the Fed’s cautious approach to balancing economic growth with inflationary pressures.

The Fed’s stance underscores its commitment to supporting the ongoing economic recovery while carefully monitoring inflation dynamics. This decision comes amid a backdrop of strong economic indicators, including robust job growth and improving consumer spending. Moving forward, market participants will closely watch for any signals from the Fed regarding potential shifts in monetary policy as economic conditions continue to evolve.

Comments by Industry Experts:

Manish Jain, Director of the Institutional Business (Equity & FI) Division at Mirae Asset Capital Markets

– A practical approach taken by the Fed today by maintaining policy rates at 5.25-5.50%. If it sounds hawkish, then it is. Fed is trying to balance the economy with maximum employment, stable demand & supply. Fed still finds inflation rate too high and doesn’t want to ease too early and face the risk of inflation coming back. Until inflation sustainably moves towards 2%, we can’t expect any easing. At the most, we can expect only one cut during this year, not more. Fed will be totally data dependent until inflation is well anchored.

Manish Chowdhury, Head of Research, StoxBox

– On expected lines, the Federal Reserve kept its key interest rate unchanged at 5.25% to 5.5% at the end of the two-day policy meeting on Wednesday. The rhetoric of any change in monetary policy outcome being driven by incoming economic data, especially consumer price inflation and labour market data, still holds true. Though the Fed’s dot plot now forecasts just one rate cut in 2024 compared to three cuts projected in March, the economic data in the recent past has shown early signs of moderation. We believe that the Fed has shown a tinge of dovishness in its commentary, with the reaction to incoming data expected to be much quicker than earlier. This should keep risk on assets such as equities supported at least in the near term. With no indication on the timing of a rate cut yesterday, our sense is that the chatter surrounding a rate cut in September is still not off the table, given yesterday’s softness in consumer price inflation.