U.S Federal Reserve keeps rates unchanged while boosting efforts to lift inflation

The
U.S Federal Reserve held its first monetary policy meeting for 2020 on
Wednesday that saw rates keeping unchanged while Jerome Powell announced that
the Fed is expected to now boost efforts directed at pulling inflation higher
to match the annual target.

Following
three consecutive rate cuts in 2019, the Federal Open Market Committee was
expected to keep rates unchanged between the range of 1.5% to 1.75%. In line
with the expectations, the central bank said on Wednesday that it will continue
to assess
the impact of the previous rate cuts on the U.S economy at large. Wednesday’s
decision marked the second time in a row for the U.S Fed to have kept rates
unchanged.

U.S Federal Reserve Has A Target Of 2% (Annual Rate) For Inflation

While
the policymakers expressed confidence in the U.S economy, Powell highlighted
that inflation has missed the Fed’s target of 2% annual rate for too long and
that the Federal Reserve will now strategize the monetary policy most fiercely
towards meeting this target.

According
to the Fed, consumers are satisfied with the low prices but at the cost of
inflation and interest rates keeping below the levels that are taken as
standard. Under such circumstances, it will get increasingly challenging for
the Federal Reserve to cut in the time to come.

Highlighting
bringing inflation higher as the topmost priority, the Fed is now likely to
keep rates lower until the inflation target is hit. Policymakers did also hint
at the prospect of sending inflation a little higher than the target for a few
months as well.

U.S Federal Reserve Increased IOER To 1.6% In January

While
rates remained unchanged in January’s meeting, the interest that the Federal
Reserve pays on funds that are currently stored
at the central bank was slightly adjusted. According to the Fed, IOER
(interest on excess reserves rate) was increased to 1.6% on Wednesday that
marked a surge of 5 basis points.

All
in all, the U.S Federal Reserve kept its stance of reporting a moderate rate
for economic growth while branding the labor market as strong.

The
forex market didn’t respond too aggressively to the FOMC (Federal Open Market
Committee) statement on Wednesday. EUR/USD marked a 20 pips drop from 1.1020 to
1.10 after the FOMC press release. The U.S Bureau of Economic Analysis is
expected to announce the quarterly GDP report on Thursday that is likely to
fuel the next big move in the currency pair.