The US Federal Reserve (Fed) is maintaining its benchmark interest rate in the range of 3.50 to 3.75 percent. The Fed announced this in a press release after a policy meeting on Wednesday.
The Fed was expected to maintain the interest rate at a time when unrest in the Middle East has sent oil prices soaring, which could lead to rising inflation and limited growth. The United States, together with Israel, has been at war with Iran for almost three weeks.
In the press release, the US central bank notes that it is still unknown how events in the Middle East will affect the US economy in the longer term.
- The implications of developments in the Middle East for the US economy are uncertain. The committee is aware of the risks to both sides of its dual mandate, the Fed writes.
The central bank refers to its two-fold goal of, on the one hand, striving to keep inflation at two percent, and on the other hand, ensuring that employment is as high as possible.
Chief economist Allan Sørensen from the Confederation of Danish Industries points out in a written comment that the US central bank does not have a particularly large room for maneuver, among other things due to developments in the Middle East.
- Americans continue to struggle with inflation that is too high, and rising energy prices will only bring inflation even further away from the target. The weak employment may argue for a lower interest rate, but this requires that inflation calms down more, says Allan Sørensen.
The interest rate announcement from the Fed comes, among other things, in the wake of a US jobs report, which in February showed that 92,000 non-farm jobs had disappeared in the US in January. This was an unexpected drop.
Trump will be dissatisfied
US President Donald Trump has repeatedly pressed for the US central bank to lower interest rates. Therefore, the latest interest rate decision will not be well received by Trump, says equity manager Philip Jagd from Sampension in a written comment.
- The fact that the US central bank is keeping interest rates unchanged is in no way surprising. Because it was almost as certain as amen in church that they would not press the interest rate button today.
- But it will undoubtedly further inflame the mind of Trump, who the other day quite ritually lashed out at Central Bank Governor Jerome Powell and once again demanded interest rate cuts from him - this time with reference to the skyrocketing oil prices as a result of the Iran wars, he says.
Before the US and Israel launched the war against Iran, it was planned that an interest rate cut could come as early as this summer. But now the US central bank does not expect to lower interest rates until the end of the year.
At the same time as the interest rate announcement, the Fed has published its expectations for the US economy in 2026. Here it appears that the bank expects inflation of 2.7 percent by the end of the year. Previously, the Fed expected that inflation would end at 2.4 percent.
At the head of the Fed is Jerome Powell. His term as central bank governor expires in May, when he - if he receives Senate confirmation - will be replaced by Kevin Warsh, who has been appointed by Trump.
/ritzau/
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