The US Federal Reserve left its benchmark interest rate unchanged on Wednesday, after being cut three times in a row last year, a sign of a cautious approach, when the Fed rates where the inflation leads and which politics, President Donald Trump, follow could.
The central bank reduced its interest rate from 5.3 percent to 4.3 percent last year, which is partly concerned with the fact that the labor market weakened.
The attitude had slowed down in the summer and the unemployment rates ticked and led the Fed officials to approve an excess half point in September. However, the attitude recovered in the last month and the unemployment rate was slightly back to low 4.1 percent.
In its explanation on Wednesday, the FED has improved its assessment of the labor market as “solid” and found that the unemployment rate has “stabilized at a low level in recent months”.
The Fed also seemed to tighten her assessment of inflation and said that it “remains a little increased”.
Both a healthier labor market and a more persistent inflation would usually imply fewer FED installments in the coming months. The chairman of Fed, Jerome Powell, said that it was more difficult to measure where inflation leads, partly due to the increased uncertainty about which politics will take Trump and how quickly they will influence the economy.
Canada lowers the rates
Hours earlier, the Canada’s central bank lowered its interest rate by 25 basis points to three percent when governor Tiff Macklem warned that he could do little to negate the economic effects of US tariffs to Canadian imports.
Trump has promised widespread tariffs, tax cuts and mass shift from migrants, all of which could increase prices. He said he would impose a tariff of 25 percent on all Canadian imports, a step that could come on February 1st.
The Fed usually keeps interest rates high for slow expenses and expenses and cool inflation. Powell said in December that the central bank had entered a “new phase” in which it expected to move more consciously. In December, the FED officials signaled that they could reduce their rate twice as far this year.
Goldman Sachs economists believe that these cuts will only take place in June and December. In November, according to the Fed’s preferred measure, inflation was only 2.4 percent, not far from its target of 2.0 percent. Without the volatile categories for food and energy, core prices rose by 2.8 percent compared to the previous year.
