Fed holds US interest rates again after three months of disappointing inflation data

1 May 2024, 16:09 | Updated: 1 May 2024, 22:17

The US central bank, the Fed, has again kept interest rates high - at 5.25% to 5.5%.

It comes despite the policymaker signaling in January that interest rate cuts were around the corner.

Progress in bringing down rates and making borrowing cheaper has been hampered by rising inflation in the US.

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It could now be that rates are only cut once in 2024, less than expected, as high rates are deemed necessary to take money out of the economy and slow price rises.

Data last week showed inflation hit 3.5% in March, up from 3.2% in February and 3.1% in January - above the Fed's inflation target and higher than expected.

Inflation falls are not guaranteed, with Fed chair Jerome Powell cautioning: "Further progress in bringing it down is not assured and the path forward is uncertain."

More confidence that inflation is under control will be needed before policymakers start making any cuts.

Gaining that confidence will take "longer than previously expected", Mr Powell added.

"In recent months, there has been a lack of further progress toward the Committee's 2% [inflation] objective," the bank's boss said.

It suggests interest rates will remain higher for longer - but Mr Powell said another hike was "unlikely".

"The committee does not expect it will be appropriate to reduce the target range [of interest rates] until it has gained greater confidence that inflation is moving sustainably toward 2%," the Fed said.

Mr Powell would not be drawn on if, and possibly when, rates would be cut. "There are paths to cutting, there are paths to not cutting", he told reporters.

Central banks in the UK, US, and EU are all aiming to bring inflation down to 2%.

The Bank of England faces a similar decision next week when it will announce its own interest rate decision.

Markets had been expecting a cut in May, but are now not expecting one until August, according to data from Refinitv.

Unlike the UK, the US interest rate is a range to guide lenders rather than a single percentage.

(c) Sky News 2024: Fed holds US interest rates again after three months of disappointing inflation data