The US Federal Reserve considers interest rate cut if inflation shows sustained decline

AP

"The Federal Reserve signaled that it is approaching an interest rate cut, a sign that its officials are confident they have inflation under control.

The U.S. central bank left the interest rate unchanged at 5.4%, a 22-year low. But in a statement, the institution indicated an imminent change by removing the text included in previous statements that it is considering future increases.

Still, the bank emphasized that it 'does not anticipate that it will be appropriate' to reduce interest rates 'until it has gained greater confidence that inflation is moving sustainably' toward its 2% target.

More: Texas Governor assures he will expand security operation on the border with Mexico

This suggests that it is unlikely that the bank will cut rates at its next meeting in March.

The changes in the statement, compared to the language used in its last bulletin in December, indicate that the bank has definitely shifted to considering rate cuts. In December, the bank said it would apply three quarter-point reductions this year.

However, officials have said little about when they would start, although a few days ago, they emphasized that the institution would proceed with caution.

The Fed's change in position comes as the economy has shown surprising strength after 11 interest rate hikes aimed at curbing inflation that reached four-decade highs 18 months ago.

In the last six months, prices have risen at an annual rate below 2%, which aligns with the bank's target, according to the Fed's preferred inflation measure. And economic growth remains healthy. In the last three months of last year, the economy grew at an annual rate of 3.3%, the government reported a few weeks ago.

More: Trump pledges to increase tariffs on products from China if elected in November

The Fed is assessing the economy as the electoral campaign is affected by voters' perception of President Joe Biden's economic management. Republicans in Congress are trying to blame Biden for the inflation that hit the nation since 2021, but recent polls indicate increased confidence in the economy.

Most analysts project that the first rate cut will occur in May or June. A rate cut could eventually lead to lower credit costs for consumers and businesses, including mortgages, car loans, and credit cards."