The US interest rate is not going anywhere right now, but later in the year it will fall further. This is the message from the US central bank, the Federal Reserve (Fed), which held an interest rate meeting on Tuesday and Wednesday. The outcome was as expected: The interest rate will remain between 4.25 and 4.5 percent until the next meeting.
This means that the interest rate will remain where it is for the second time in a row, and this does not surprise Allan Sørensen, chief economist at the Confederation of Danish Industry.
- The chance of an interest rate cut was already dead before the meeting started. Donald Trump is pursuing a policy that is incompatible with lower interest rates. Tariffs on imports will push up prices, which is why the Fed is sticking to a tight monetary policy, he says.
The US interest rate tends to be passed on to long-term housing interest rates in Denmark, and therefore homeowners can benefit from following how it develops in the long term. This is what Jeppe Juul Borre, chief economist at Arbejdernes Landsbank, writes. He points out that rising inflation will probably be met by rising central bank interest rates.
- Conversely, if the situation calms down, where the economy and inflation in particular do not accelerate, then there is the potential for interest rates to fall. And that could open a conversion window for many Danish homeowners with high interest rates on their current fixed-rate loans, he says.
Expect interest rate cuts
The expectation among the leading members of the central bank is that the interest rate will be lowered twice this year, and that by New Year's Eve it will be around 3.875 percent.
Central Bank Governor Jerome Powell explains that the decision to maintain the interest rate should be seen in light of the fact that it is currently quite unpredictable where the American economy is heading.
- The uncertainty surrounding our predictions has increased, he said at a press conference after the interest rate announcement was published.
Here he also explained that the tariff war is probably the reason why inflation has taken a small jump upwards this year. But it is difficult to isolate the effect of the new tariffs on certain imported goods, and some of it will also only show up in the figures with a certain delay.
On Thursday night Danish time, Trump wrote in a post on his social media, Truth Social, that the Fed would be better served by lowering interest rates "when the US tariffs start to hit the economy".
/ritzau/
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