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Despite Pressure Fed Keeps Interest Rates Unchanged

Wait-and-watch approach by Federal Reserve leaves interest rates unchanged on Wednesday.

Despite growing pressure from the U.S. President Donald Trump to bring down interest rates, the Fed has left benchmark rates unchanged.

With some good economic data coming from the U.S, fear of an economic slowdown in the U.S. is slowly residing. There seems to be some positive data from the talks between the U.S. and China which this has helped to lift up the sentiment too. Further, the Brexit negotiations are being extended.

The labor market has remained strong, though business investment and household spending has slowed down for the first quarter, which has improved market sentiment.

The Federal bank has decided to keep the interest rates unchanged between 2.25 percent and 2.5percent. Jerome Powell the Fed Chairman has said that the global sentiment has “somewhat moderated” currently.

The Federal Open Market Committee has reported in a statement that the Committee will remain patient in the light of the current financial development, muted inflation data and global economic conditions.

President Trump had tried to pressurize the Fed to decrease interest rates. We can go up like a rocked if rates are lowered and there is some quantitative easing, he has tweeted. But the Fed has not bowed down to the political pressure.

The Fed Head Powell has said that the Fed is “non-political” in nature which has long-term goals and does not work for short-term considerations.

The Fed had taken a “patient approach” in March when it said that it would not continue to raise interest rates for the year. It would wait patiently for the economy to recover.

But now that the inflation is slowing down much below the 2 percent target, investors expect that the Fed would go back to its policy of hiking interest rates. In 2018, interest rates were hiked four times. But, with the patient approach, no hike has been announced for 2019.

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