The US Federal Reserve on Wednesday voted to pause its aggressive campaign of interest rate hikes despite “elevated” inflation, while indicating a sharp increase could be needed before the end of the year.
“It allows the economy a little more time to adapt as we make our decisions going forward,” US Fed Chairman Jerome Powell said at a news conference after the announcement.
After 10 straight increases, the Fed’s rate-setting committee voted to hold its benchmark lending rate from 5 to 5.25 percent, the US central bank said in a statement.
Photo: AFP
The widely-expected decision gives policymakers on the US Federal Open Market Committee time “to assess additional information and its implications for monetary policy,” the Fed said.
However, committee members hinted that more monetary tightening lies ahead, raising the median projection for interest rates at the end of this year by another half percentage point.
“Looking ahead, nearly all committee participants view it as likely that some further rate increases will be appropriate this year to bring inflation down to 2 percent over time,” Powell said.
The US economy has shown signs of slowing in recent months, with the Fed forecasting a mild recession to begin later this year.
However, despite the Fed’s campaign of monetary tightening, annual inflation remains “elevated” above the US central bank’s long-term target of 2 percent, while unemployment remains low, the Fed said.
Recent indicators suggest that “economic activity has continued to expand at a modest pace,” it added.
The Fed also updated its economic forecast on Wednesday, lifting its GDP growth projection for this year to 1 percent from 0.4 percent in March.
Median inflation expectations for the year nudged down slightly to 3.2 percent, while core inflation expectations, which exclude volatile food and energy prices, rose to an annual rate of 3.9 percent, the Fed said.
The US economy faces “potential headwinds” from tighter credit conditions in the aftermath of the collapse of a number of regional lenders earlier this year, Powell said.
“It may make sense for rates to move higher, but at a more moderate pace,” he said.
US policymakers are “concerned that wage pressures will remain as the labor market remains very tight,” Oanda Corp senior market analyst Edward Moya said.
“With the US banking system remaining resilient and robust job gains, the Fed needs to deliver more tightening and that is why the dot plots [officials’ projections] are pricing in two more small rate hikes,” Moya added.
Most markets in Asia yesterday rose after the Fed decided against hiking interest rates, while the Chinese central bank cut borrowing costs to stimulate the struggling economy.
In Taipei, the TAIEX closed up 96.84 points — or 0.56 percent — at 17,334.98.
Bangkok, Hong Kong, Jakarta, Shanghai, Singapore, Sydney and Wellington all rose, but there were losses in Manila, Mumbai, Seoul and Tokyo.
MULTIFACETED: A task force has analyzed possible scenarios and created responses to assist domestic industries in dealing with US tariffs, the economics minister said The Executive Yuan is tomorrow to announce countermeasures to US President Donald Trump’s planned reciprocal tariffs, although the details of the plan would not be made public until Monday next week, Minister of Economic Affairs J.W. Kuo (郭智輝) said yesterday. The Cabinet established an economic and trade task force in November last year to deal with US trade and tariff related issues, Kuo told reporters outside the legislature in Taipei. The task force has been analyzing and evaluating all kinds of scenarios to identify suitable responses and determine how best to assist domestic industries in managing the effects of Trump’s tariffs, he
TIGHT-LIPPED: UMC said it had no merger plans at the moment, after Nikkei Asia reported that the firm and GlobalFoundries were considering restarting merger talks United Microelectronics Corp (UMC, 聯電), the world’s No. 4 contract chipmaker, yesterday launched a new US$5 billion 12-inch chip factory in Singapore as part of its latest effort to diversify its manufacturing footprint amid growing geopolitical risks. The new factory, adjacent to UMC’s existing Singapore fab in the Pasir Res Wafer Fab Park, is scheduled to enter volume production next year, utilizing mature 22-nanometer and 28-nanometer process technologies, UMC said in a statement. The company plans to invest US$5 billion during the first phase of the new fab, which would have an installed capacity of 30,000 12-inch wafers per month, it said. The
Taiwan’s official purchasing managers’ index (PMI) last month rose 0.2 percentage points to 54.2, in a second consecutive month of expansion, thanks to front-loading demand intended to avoid potential US tariff hikes, the Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) said yesterday. While short-term demand appeared robust, uncertainties rose due to US President Donald Trump’s unpredictable trade policy, CIER president Lien Hsien-ming (連賢明) told a news conference in Taipei. Taiwan’s economy this year would be characterized by high-level fluctuations and the volatility would be wilder than most expect, Lien said Demand for electronics, particularly semiconductors, continues to benefit from US technology giants’ effort
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
RSS