Federal Reserve announces interest rate decision

The Federal Reserve (Fed) kept the policy rate unchanged, holding it steady in the 3.50%–3.75% range.

While the decision statement provided no clues regarding the timing of interest rate cuts, it drew attention to the uncertainties created by tensions in the Middle East and rising inflation risks.

WHAT WAS THE MARKET REACTION?

Movements were observed in the markets following the critical Fed interest rate decision. Gold (ounce) was at the $4,553 level before the critical data. Following the decision, it is at the $4,529 level.

The dollar index was at 98.89 points before the Fed decision. Immediately after the decision, it is at 98.97 points.

Silver (ounce) was at the $71.50 level before the Fed. Following the decision, it is at $71.01.

The euro/dollar parity was at 1.1681 before the Fed interest rate decision. After the decision, it is moving at 1.1672.

Gold (gram) was moving at 6,588 liras before the Fed. After the decision, it is at 6,553 liras.

NO GREEN LIGHT FOR INTEREST RATE CUTS

The Federal Reserve announced the interest rate decision that markets were eagerly awaiting. The bank, which kept the benchmark interest rate steady at the 3.50% to 3.75% level, did not share any calendar regarding the interest rate cut process. The Fed presented the high uncertainty created by tensions in the Middle East on the global economy as one of the main justifications for the decision.

ECONOMIC OUTLOOK AND INFLATION WARNING

While the decision statement noted that the US economy continues to grow at a "solid pace," it stated that job gains have been moderate and the unemployment rate has remained stable. However, the change in tone regarding inflation was notable:

Inflation Definition Hardened: Inflation, previously described as "somewhat elevated," is now characterized as "elevated" due to the impact of rising energy prices.

Dual-Sided Risk Monitoring: The Fed emphasized that risks to both economic growth and inflation are being closely monitored.

A FIRST SINCE 1992

Disagreements within the Fed reached a 34-year high with this meeting. The decision was taken with an 8-to-4 vote, which was recorded as the highest rate of dissent seen since 1992.

The details of the divergence among members are as follows:

One member voted in favor of an immediate interest rate cut.

Three members were completely opposed to any easing (interest rate cut) tendency.