USA is keeping key interest rates high and is promising cuts, will prices rise?
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US Federal Reserve announced its course for the near future. Although it continues to keep key interest rates at record highs, it has indicated several interest rate cuts next year.
As expected, the central bankers did not change their course yesterday . They left the interest rate in the range between 5.25 and 5.50 percent. This is the highest key interest rate that the USA has recorded in 22 years. At the same time, however, the Fed offered a glimmer of hope for all those who are suffering from high interest rates.
Three rate cuts next year?
It promised a total of three interest rate cuts in 2024. The Dow Jones index was just waiting for this, it shot up by more than 500 points. Optimists had expected this scenario in advance, and some of them even speculated that there would be a total of four interest rate cuts next year.
The wind slowly begins to change. The key interest rates remained unchanged at the last Fed meetings, but the monetary authorities did not rule out further increases. Apparently the fundamental economic data in the USA has moved in the desired direction, because they now want to lower interest rates again in a few months.
Starting in spring?
The period for this is still open, but the general assumption is spring. May is a good starting date for moving away from the high interest rate policy. This comes even though Fed Chairman Jerome Powell expects US economic growth to slow in the fourth quarter of this year. Overall, this should come to an increase of 2.5 percent over the entire year.
The high interest rates would also slow down growth in the real estate sector. However, the unemployment rate remains low, although employment growth is declining slightly. Powell described inflation as weakening but still too high. Overall, the aim is for a soft landing without stalling the economy.
Too early for euphoria
He left it open whether this goal could be achieved. It is still too early to declare victory over inflation. This fell to 3.1 percent in November after being at 3.2 percent in October. At the same time, however, core inflation, i.e. price increases excluding food and energy, was higher than in the previous month. This trend was also observed in October.
The waiting time hurts the economy
Some observers also see the announced interest rate cuts as a brake on the economy. If consumers now postpone their borrowing to wait for lower interest rates, it will be a shame. In any case, the expected interest rate cuts are good news for the cryptoverse. In the medium term, this will free up fresh money for investing in cryptocurrencies.
However, expectations should not skyrocket; from today’s perspective, interest rate cuts will occur slowly and in small steps. US banks expect an interest rate range of 4.75 to 5 percent at the end of 2024.
