Despite the announcement on Wednesday that inflation, or the rate at which prices rise, dropped to 3.4%—the lowest level in more than three years—the cost of borrowing in the United States remained at a level higher than 20 years ago.
The interest rate-setting committee of the Federal Reserve released updated advice, indicating that this year’s rate cuts will only occur once. Three cuts were expected just three months ago.
The Fed stated that additional proof of declining inflation is required before any cutbacks are made, since unemployment is still low.
According to Fed Chair Jerome Powell, if unemployment increases rapidly, that might change and rates could be lowered.
Global central banks have raised interest rates in an effort to curb inflation, which skyrocketed in the wake of supply chain problems during the epidemic and the shock of rising energy prices following Russia’s invasion of Ukraine.
Although the Bank of England’s interest rate-setters in the UK do not release rate forecasts, as they do in the US, Refinitiv market data indicates that three rate cuts are expected this year.
As of right now, September is anticipated to see the first of such cuts. Prior to May, it was anticipated that interest rates would drop for the first time in almost four years, but they were kept at 5.25%.
