US Fed holds interest rates steady,sees 1 cut this year

The US Federal Reserve (US Fed), on Wednesday, maintained its key interest rate at 5.25 per cent - 5.50 per cent for the seventh straight meeting.US Fed's Federal Open Market Committee (FOMC), that ended its fourth policy-setting meeting of the year on June 12, unanimously voted to hold the policy rate at the 23-year high mark. The US central bank said in its statement, ‘’Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 per cent. In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.''While announcing its decision, the rate-setting panel indicated that only one rate cut is anticipated before the year's end. 
In the statement, the US central bank acknowledged resumption of at least some gains in its fight to tame inflation.US central bankers believe they’ll cut interest rates just once this year, two fewer than they thought in March as per the median of new economic projections published by the Federal Reserve at the end of their June 11-12 meeting.
The inflation report Wednesday came in cooler than expected, bolstering the view that a gradual moderation has resumed after price increases accelerated in the first quarter. Inflation overall was flat in May and a core price measure that excludes volatile food and energy items rose 0.2%, nudging down the annual increase to 3.4% from 3.6% the previous month, according to the consumer price index (CPI).Officials expect four rate cuts next year and another four in 2026, more than they previously anticipated, a blueprint that would lower the key rate to 3.1% by the end of 2026. That’s in line with their March estimate.Some economists still believe the Fed will trim rates twice this year.

(Writer is a Finance Research Analyst, based in Gandhinagar, Gujarat)