US Federal Reserve keeps interest rates unchanged but inflation remains major concern

US Federal Reserve keeps interest rates unchanged but inflation remains major concern

US Federal Reserve has kept interest rates unchanged but Fed Chair Jerome Powell added that there could be two more rate hikes this year. On Wednesday, June 14, the US Federal Reserve made an announcement stating that it would maintain the current interest rates, choosing not to increase them for the 11th consecutive time. This decision is a result of the central bank's cautious evaluation of the impact of the previous 10 rate hikes on the economy.

Following the policy decision, the US markets had a mixed response. The Nasdaq technology index was trading nearly 0.7 percent higher, while the Dow Jones was down by approximately 0.8 percent. Market participants had anticipated the Federal Reserve to pause rate hikes, and this optimism had caused a recent rally in stocks. Particularly, the Nasdaq, driven by the growth of major technology companies in the field of artificial intelligence, is currently hovering around its yearly highs.

However, along with the decision to maintain interest rates during this meeting, the Federal Open Market Committee also provided a forecast indicating that two quarter percentage point hikes are expected before the end of the year.

As a result, the key borrowing rate set by the Federal Reserve remains within the target range of 5 percent to 5.25 percent.

Traders may be concerned about the possibility of the Federal Reserve not reducing rates for some time, especially considering that the recent data release showed an inflation rate of 4.0 percent, while the Federal Reserve has a target of 2 percent for inflation.

The next meeting of the Federal Reserve is scheduled for July 25-26.

With the Federal Reserve pausing interest rate hikes, it is likely that the stock markets will remain stable in the upcoming days. There might be a slight correction as the markets have experienced rapid movement in the past two weeks. However, overall sentiment is expected to remain positive, at least until the next Federal Reserve meeting.

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