US Federal Reserve Keeps Benchmark Interest Rate Unchanged

The US Federal Reserve (Fed) has decided to keep the benchmark interest rate unchanged in its recent meeting. This marks the third consecutive time that the interest rate has remained in the range of 5.25 to 5.5 percent. This decision was expected as the Fed had raised the interest rate eleven times in recent months to combat rising inflation. However, in November, there was a slight easing as the annual inflation rate in the United States dropped to 3.1 percent. The Fed aims for an inflation rate of 2.0 percent.

Although the benchmark interest rates are staying stable for now, the Fed signaled that it could soon end the current cycle and introduce the first interest rate cuts. This comes amid declining inflation forecasts, as the inflation rate measured by the PCE price index for 2023 is expected to average 2.8 percent. This is a slight decrease compared to the earlier forecast of 3.3 percent in September. For 2024, the Fed predicts an inflation rate of 2.4 percent, down from the previous estimate of 2.5 percent. Core inflation, which excludes volatile food and energy prices, is estimated at 3.2 percent for this year and 2.4 percent for the next year.

The US central bank also expects stronger economic growth, with forecasts for the world's largest economy being raised from 2.1 percent to 2.6 percent. A growth rate of 1.4 percent is predicted for the coming year. However, the Fed emphasizes that the economy has recently weakened slightly compared to the strong third quarter, and job growth is more moderate.

Federal Reserve Chairman Jerome Powell stated in a press conference that further interest rate hikes are not ruled out, but the Fed believes that interest rates in this cycle are near their peak. The Fed's new interest rate projections also suggest an end to the interest rate hike cycle, as members expect an average benchmark interest rate of 4.6 percent by the end of next year, compared to 5.1 percent in September. This development could indicate impending interest rate cuts next year, which was initially well-received in the financial markets as the US stock market's leading index, the Dow Jones, reached a record high of over 37,000 points.