The Federal Reserve took a cautious route this week, once again opting to leave interest rates unchanged. The decision to stay the course comes on the heels of slightly slower economic expansion and cooling inflation.
The U.S. economy has been growing moderately over the past few months, although not enough to be considered strong. A variety of economic indicators have pointed to slow but consistent growth, however inflation has seen some declines in recent months. This made it easy for the Federal Reserve to leave its benchmark short-term interest rate at its current range of 2.25% to 2.5%.
The Federal Reserve has been committed to slow but steady rate hikes in recent years. This approach has been used to both ward off inflationary pressures and to keep the economy from growing too quickly. However, the decision to keep rates the same this week was made with the understanding that inflation has cooled slightly in recent months.
Inflation is still high by historical standards but it is consistently being monitored in order to ensure that it doesn’t get out of control. The Federal Reserve also noted that its balance sheet is getting smaller and the labor market continues to be strong.
Overall, this decision by the Federal Reserve to leave interest rates unchanged highlights how it is continuing to take a measured and cautious approach to the U.S. economy. With the understanding that inflation is cooling slightly, the office is working to ensure that it can provide the appropriate level of support without dramatically disrupting the current economic state.
