The US Federal Reserve kept its key monetary policy rate steady at a 23-year-high on Wednesday – the eighth consecutive time it has hit the pause button, and said it had made "some further progress" in its fight against inflation in the world's top economy.
As expected, the Federal Open Market Committee (FOMC) voted unanimously to maintain its benchmark interest rate between 5.25 per cent and 5.5 per cent in the US on Wednesday following two days of deliberations, adding it was "attentive to the risks to both sides of its dual mandate."
While central bankers led by Fed Chair Jerome Powell were widely expected to hold rates steady, traders were keen for evidence that policymakers are ready to cut rates in September, with expectations for a quarter-point rate reduction at the meeting, and a slight chance for a half-point cut.
UAE holds interest rates steady
Shortly after the Fed's announcement, the UAE Central Bank said it's keeping its interest rate unchanged.
"The Central Bank of the UAE (CBUAE) has decided to maintain the Base Rate applicable to the Overnight Deposit Facility (ODF) without change at 5.40 per cent,” it said in a statement. "This decision was taken following the US Federal Reserve’s announcement today to keep the Interest Rate on Reserve Balances (IORB) unchanged."
The CBUAE has also decided to maintain the interest rate applicable to borrowing short-term liquidity from the CBUAE at 50 basis points above the Base Rate for all standing credit facilities. (The Base Rate, which is anchored to the US Federal Reserve’s IORB, signals the general stance of monetary policy and provides an effective floor for overnight money market interest rates in the UAE.)
US inflation back under control?
After a small uptick in inflation earlier this year, recent data suggest that the Fed's mission of bringing inflation back down to its long-term target of two percent is now firmly back on track.
Its favored measure of inflation eased to an annual rate of 2.5 per cent last month, while economic growth has remained resilient, and the labor market has come into better balance.
"In recent months, there has been some further progress toward the Committee's 2 percent inflation objective," the Fed said. This marks a slight change in tone from its decision in June, when it noted only that "modest further progress" had been made.
- with inputs from Agencies
