Inflation worries continue for US Fed, no policy rate cut for sixth time

Washington [US], May 2 : The US Federal Reserve, in its latest monetary policy meeting, voted to leave the key interest rate unchanged at 5.25-5.50 per cent, keeping the policy rate unchanged for the sixth straight time on the trot.

During the COVID-19 pandemic, the interest rates were near zero.

Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.

Consumer price inflation in the US continued to trend down, though it remained above 2 per cent, and it a pain point for its central bank. In the 12 months through March, the inflation increased 3.5 per cent year-on-year, the highest in about 6 months. This followed a 3.2 per cent rise in February.

"Inflation has eased over the past year but remains elevated. In recent months, there has been a lack of further progress toward the Committee's 2 percent inflation objective," said US central bank in its monetary policy statement.

US Fed seeks to achieve maximum employment and inflation at the rate of 2 per cent over the longer run.

It does not expect it will be appropriate to reduce the rate until it has gained greater confidence that inflation is moving sustainably toward 2 per cent.

"The Committee is strongly committed to returning inflation to its 2 per cent objective," US Fed said.

Recently, rating agency Moody's said it believes an interest rate cut during the US Federal Reserve's June meeting is likely off the table given stubborn inflation in the country. This assertion by the global rating agency then came soon after the US reported more than-expected inflation figures in March.

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