On May 1, as expected by the market, the Fed decided not to raise interest rates after a two-day policy meeting. The reference interest rate in the US is currently around 5.25-5.5% - the highest level in 23 years. In the previous five meetings, this agency also kept interest rates unchanged.

The Fed has raised interest rates 11 times since March 2022 to curb inflation. US inflation slowed significantly from a 40-year peak in the summer of 2022, but recent data showed a "lack of improvement," according to the Fed's announcement.

"Inflation is too high and the cooling is not sustainable. It may take some time before we feel more confident in this process," Fed Chairman Jerome Powell said at a press conference on May 1.

The personal consumption expenditures (PCE) price index was 2.7% in March - up from 2.5% in February. The Fed's target is 2%.

Stocks were mixed after Powell said there was "no chance" of another rate hike. The DJIA closed up 0.2% on May 1. Meanwhile, the S&P 500 and Nasdaq Composite both fell 0.3%. The world spot gold price increased by more than $30 to $2,317 an ounce.

The Fed also announced that it would ease restrictions on the economy by slowing the pace of its balance sheet shrinkage. In addition to interest rates, this is also a tool to help them stimulate or cool the economy. Accordingly, from June, the Fed will let $25 billion in government bonds mature each month without buying them back. Previously, this number was $60 billion.

During his press conference, Powell said there were several scenarios that could lead to a rate cut, including inflation cooling again as the economy and job market stabilize, which is what happened last year.

The U.S. job market remains solid overall. The unemployment rate is below 4% and businesses are hiring aggressively. The April jobs report will be released on May 3.

Powell expects the economy and inflation to cool in the second half of the year as pandemic savings shrink. But persistent inflation is dragging down forecasts for when the Fed will start cutting rates. JPMorgan and Goldman Sachs see the first cut in July, while Wells Fargo is betting on September and Bank of America believes the Fed won’t act until December.

Currently, according to the CME FedWatch interest rate tracker, the market is betting on November.

Powell is waiting for other data to cool, such as rents. He also asserted that the economy is not in stagflation — high inflation coupled with slow growth.

Ha Thu (according to CNN, Reuters)