Fed keeps rates on hold, waits for inflation to ease

The Federal Reserve, the US central bank, announced on Wednesday that it will once again hold its key interest rate steady at a range of 5.25-5.50 per cent, a 23-year high. This marks the fifth meeting in a row that the bank’s rate-setting committee decided to keep rates unchanged, as it waits for inflation to ease before it considers cutting rates.

The Fed acknowledged that inflation has eased over the past year but stressed that officials do not expect it would be appropriate to relax monetary policy until they have gained “greater confidence” that inflation is moving sustainably toward that bank’s two per cent long-term goal. “Nonetheless, we’re looking for data that confirm the low readings that we had last year,” Fed chair Jerome Powell said at a press conference after the meeting.

Meanwhile, the rise in UK consumer prices retreated to the lowest in nearly two-and-a-half years in February, as food inflation weakened, data by the Office for National Statistics showed last week.

Consumer prices rose by an annual rate of 3.4 per cent, marking the lowest rate of inflation since September 2021, following a reading of four per cent the prior month. Economists had predicted an annual rate of 3.5 per cent. Food and restaurant prices were the biggest contributor to falling inflation, partly offset by fuel and housing, the ONS said. Core inflation, which excludes energy, food and tobacco prices, fell to 4.5 per cent from 5.1 per cent in January versus expectation of 4.6 per cent.

Finally, India’s business activity rose at the fastest pace in eight months in March, ending this fiscal year on a high note, fuelling expectations that the country is set to remain the world’s fastest growing among the major economies.

The HSBC Flash India Composite Purchasing Managers’ Output Index rose to 61.3 in March, higher than February’s revised reading of 60.6, following the fastest expansion in the manufacturing and service sectors since July 2023.

Readings above 50 imply expansion in the sector. Survey participants said that efficiency gains, robust consumer appetite, accompanied by investment in technology and favourable market conditions, prompted the increase in sales.

This article does not constitute legal and/or financial advice and is being issued for information purposes only by Bank of Valletta plc, 58, Zachary Street, Valletta. Bank of Valletta is a public limited company regulated by the MFSA and is licensed to carry out the business of banking and investment services in terms of the Banking Act (Cap. 371 of the Laws of Malta) and the Investment Services Act (Cap. 370 of the Laws of Malta).