Federal Reserve holds on Interest Hike. Economists foresee stability, though hints at future cuts in 2024

Interest rates in the USA have once again remained steady, falling within the 5.25-5.50 percent range. This level has persisted for another month. In July, there was an increase in rates by 25 basis points compared to June. However, since the begging of 2001, there hasn't been a change in the level of the rates until last November.

The Federal Reserve's decision aligns with the expectations of both the money market and economists. This observation is shared by Michael Stajniak, Deputy Director of XTB's Analysis Department.

"All economists surveyed predict that interest rates will maintain their current level and there will not be a further increase next year unless an unexpected inflationary event occurs," he noted in his analysis before the decision was announced.

Stajniak highlighted speculations that the Fed might consider one more rate increase due to a recent easing in the financial situation in the USA. However, since the inflation rate has decreased significantly, an additional increase could potentially result in a recession.

"Nonetheless, communication from the Fed will be crucial. The Fed's most recent forecasts indicated that interest rates will only be cut once by 25 basis points next year. However, market predictions are factoring in up to 4 such increases, which could have been a significant driver of recent stock market trends," - expert evaluated.

He stressed that unexpected stances by the Fed could provoke a dramatic reaction from the markets.

"Given the recent drop in inflation, it is unlikely that the Fed would decide to maintain such high-interest rates for an extended period." According to Stajniak, maintaining such high accurate interest rates for a prolonged period could increase the risk of a recession.