On November 1, at the end of the two-day policy meeting, the US Federal Reserve (Fed) has decided to maintain interest rate stable at the highest level in 22 years but still leaves open the possibility of raising interest rates in the near future to curb inflation.
| Headquarters of the US Federal Reserve (FED) in Washington, DC. Photo: AFP/TTXVN |
Fed notes surprising signs of growth US economy in the third quarter of 2023 but also recognizes the tightening financial conditions facing businesses and households. According to the Fed, “economic activity expanded at a strong pace in the third quarter” is the basis for Fed policymakers to agree to keep the benchmark interest rate unchanged at 5.25% -5.50%, maintained from July 2023. Recent data shows that the US Gross Domestic Product (GDP) grew by 4.9% in the third quarter of 2023.
The Fed’s latest statement also noted that with employment growth remaining “strong” and inflation remaining “elevated,” the Fed continues to consider “the extent to which additional policy consolidation may be appropriate to bring inflation under control.” to the target level of 2%”. Fed Chairman Jerome Powell’s statement may be of particular importance to investors trying to predict whether the Fed still plans to raise interest rates again as previously announced by the Fed. Keeping interest rates unchanged this time shows that the Fed is still monitoring the growing impact of past interest rate increases when considering its next action, aware of “the lag with which monetary policy affects economic activity and inflation as well as economic and financial developments”.
Savings during the COVID-19 pandemic, combined with low unemployment and persistently rising wages, allow consumers to continue spending, helping to support economic growth. That eases concerns about student loan payment deferrals and weakening consumer confidence that will make everyone nervous. Companies such as McDonald’s and Amazon have recorded positive business results while home prices continue to rise despite high mortgage interest rates.
Since support programs implemented during the COVID-19 epidemic pumped trillions of dollars into household bank accounts, analysts have been trying to predict when consumers will run out of money. that money. After the government announced impressive economic growth in the third quarter of 2023 last week, some analysts reassessed and said that perhaps there are still billions of dollars left unspent and if spent, could push prices higher.
Meanwhile, according to the Conference Board research organization, consumer spending continues to increase even though consumer confidence has decreased in the context of many worrying issues, including recent instability. in the Middle East.