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A committee of Federal Reserve officials voted Wednesday to keep interest rates at a 22-year high after unexpectedly high job gains and inflation delayed likely plans for rate cuts.
The Federal Open Market Committee (FOMC), the panel of Fed officials responsible for setting borrowing costs, voted to keep its baseline interest rate at the range of 5.25 to 5.5 percent set last June. The FOMC voted unanimously to hold rates steady.
The central bank is not yet confident that inflation, which has plummeted after the Fed began hiking rates in March 2022, is on pace to reach its goal of a 2 percent annual rate.
According to the Labor Department’s Consumer Price Index (CPI), annual inflation reached a 40-year peak of 9.1 percent in June 2022. However, it has since declined, dropping to 3.1 percent in January and slightly increasing to 3.2 percent last month. Concurrently, the job market has defied current predictions, with the U.S. economy adding 275,000 jobs last month in addition to substantial gains in December and January, while the unemployment rate stayed below 4 percent.
The lack of significant inflation and robust job growth dashed earlier expectations for the Fed to implement its initial rate cut in March. Economists are now primarily focusing on the central bank’s June meeting as the potential timeframe for a rate cut.
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