The US Federal Reserve System (FRS), which serves as the country's central bank, following a two-day meeting on April 30 – May 1, left the discount rate at the level of 5.25-5.5% per annum. This is stated in the regulator's press release. The Fed has kept the rate at this level since July 2023.
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Market expectations
Keeping the rate at the same level at the Fed meeting was expected. As of May 1, the market estimated the probability of such a scenario at 97.5%, according to data from the FedWatch tool, which is calculated by the CME exchange based on rate futures.
The probability of a rate cut by 25 basis points, to 5-5 .25%, traders estimated only 2.5%. Economists surveyed by Reuters predicted that at the meeting in April the Fed rate would remain in the range of 5.25-5.5%.
In the message following the meeting, the Fed noted that it does not see the advisability of reducing the target range to until there is greater confidence that inflation is steadily approaching 2%. At the same time, a new phrase appeared in the press release, which emphasizes that “in recent months there has been no further progress in achieving the committee’s inflation target.”
“Starting in June, the committee will slow the pace of reduction of its securities holdings, lowering the monthly redemption limit on Treasury securities from $60 billion to $25 billion,” the document also notes.
Overall, the Fed remains committed to monitoring the impact of incoming information on the economic outlook and will adjust accordingly its monetary policy if risks arise that may interfere with the achievement of the regulator’s goals.
- Fed Discount rate