The US Federal Reserve announced on Wednesday (July 31) that it will continue to hold its benchmark interest rate steady at 5.25 to 5.5 percent following the two day Federal Open Market Committee meeting.
The central bank has now maintained its policy for one year since its last rate increase in July 2023.
The meeting comes just days after the US Bureau of Labor statistics released the latest personal consumption expenditures (PCE) price index data, which indicates that inflation continued to cool in June.
The data shows a year-on-year increase of 2.5 percent in June, down from the 2.6 percent reported in May.
PCE is a favored measure of the Fed as it works to bring inflation back down to its target rate of 2 percent.
In its decision, the committee said it is seeking greater confidence that inflation is moving sustainably toward its goal, and will continue to assess “incoming data as it is available, the evolving outlook and the balance of risks.”
It reiterated that the economic outlook remains uncertain, and said it will continue to monitor economic indicators and labor market conditions. Analysts widely expected the central bank to leave rates unchanged at this meeting, with economists predicting that the first cut will come during its next meeting in September.
“We expect rate cuts in the second half of this year to support business-to-business demand, with manufacturing and industrial activity benefiting in 2025 and 2026,’ said ITR Economics economist Lauren Saidel-Baker.
Markets rallied ahead of the Fed’s release, with the Nasdaq-100 (INDEXNASDAQ:NDX) and S&P 500 (INDEXSP:.INX) leading with 3.25 percent and 1.7 percent gains after a strong earnings report from AMD (NASDAQ:AMD) pushed chipmakers and the tech sector higher. The Dow Jones Industrial Average (INDEXDJX:.DJI) was up just under 1 percent.
Prices for gold and silver were also up in morning trading, fueled by increasing tensions in the Middle East following Israeli assassinations of Hezbollah and Hamas leadership in Lebanon and Iran, respectively; both precious metals spiked further once the Fed meeting was complete.
As of 3:40 p.m. EDT on Wednesday, gold had climbed 1.28 percent from the market’s open to move above US$2,450 per ounce, and silver had climbed 1.26 percent in the same period to hit US$29 per ounce.
Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.
