The US Federal Reserve kept interest rates unchanged on Wednesday.
The Fed’s FOMC (Federal Open Market Committee) report said that while recent indicators suggest that economic activity has continued to expand at a solid pace, job gains have remained strong, and the unemployment rate has remained low, inflation has remained elevated.
“Inflation has eased over the past year but remains elevated. In recent months, there has been modest further progress toward the Committee’s 2 percent inflation objective,” the FOMC statement said.
“The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals have moved toward better balance over the past year. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks,” the statement added.
The US Federal Reserve had set the benchmark policy rate in the 5.25-5.50 percent range last July.
UAE maintains key rate
Following the Fed’s announcement, the UAE Central Bank said it has decided to keep its base rate unchanged.
“The Central Bank of the UAE (CBUAE) has decided to maintain the base rate applicable to the overnight deposit facility (ODF) at 5.40 percent. The CBUAE has also decided to maintain the interest rate applicable to borrowing short-term liquidity from the CBUAE at 50 basis points above the base rate for all standing credit facilities,” the central bank said.
Inflation declines
Hours before Wednesday’s announcement, the Bureau of Labor Statistics announced that inflation in the US, measured by the change in Consumer Price Index, fell to 3.3 percent annually in May from 3.4 percent in April.
Annual core CPI rose 3.4 percent, below the 3.6 percent increase recorded in April and analysts’ estimate of 3.5%. On a monthly basis, the CPI was unchanged, while the core CPI was up 0.2 percent.
Jobs growth
Last week, it was reported that the U.S. economy created far more jobs than expected in May and annual wage growth reaccelerated, underscoring the resilience of the labor market.
The Labor Department’s closely watched employment report also showed that the unemployment rate ticked up to 4 percent from 3.9 percent in April.
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