- The US Federal Reserve has decided to maintain the interest rate at a 5.25% - 5.5% target.
- Similar rates were previously used in assisting the economy after the harsh hit it had taken from Covid.
- US CPI rates were as high as 9+% in the middle of 2022 with inflation at 6.5 % - 7% only a year prior.
- Jay Powell – the Feds chair asserts that the economy is “performing well”
- This also comes after the economy had grown by around 2.1% - 0.7% higher than expected.
- Inflation was also expected to fall by the end of the year.
- Costs in a variety of industries have also seen a significant fall.
- Energy costs dropped 1.9%
- Gasoline also saw a fall of 3.9%
- Fuel oil reduced 5.4%
- However, other industries like food, medical care and new cars all saw an increase in price.
The visible and steady decrease in the country’s inflation is what will eventually convince many in the federal reserve and US government that decreasing interest rates is the next best option.
- Higher rates were introduced to ease inflation and the factors pushing prices up.
- However, if rates are maintained at such a high level, it can prove to do more harm than good.
- Many would argue this is being seen now in the housing market as prices remain high in which only 15.5% of houses are considered affordable in 2023 (source: Redfin)
- A Harvard’s Joint Centre for Housing Studies also found that rent prices also massively increased where home for rent for $2000 p/m in the country doubled and the number of properties put out for rent between $600-$799 saw a drop from 9 million units in 2012 to 5.8 million 10 years later.