On Wednesday, the Federal Reserve announced that they would be keeping interest rates steady in light of a cooling inflation rate. This is the sixth decision of its kind announced by the Fed this year, reaffirming their commitment to keeping the financial markets stable.
The decision to keep interest rates steady was made even as the government’s inflation rate has cooled from an annual rate of 2.3% in June to 1.7% in September. Keeping interest rates steady is typically a sign of a healthy economy, and is an indication that the Federal Reserve believes that the U.S. economy is on a steady course.
Since the onset of the COVID-19 pandemic, the Federal Reserve has been dedicated to providing support to the market, and this decision is no exception. Although the rate decision was widely expected, the Fed also announced that they had extended their plans to keep borrowing costs near zero until early 2022. This announcement is a sign that the Fed is ready to act when needed, despite the cooling inflation rate.
In their statement, Fed Chairman Jerome Powell noted that the cooling inflation rate should not be taken as a sign of weakness for the economy. Instead, he argued that it is largely the result of the pandemic’s impact on the supply and demand of goods and services.
Although interest rates are unlikely to rise in the near future, the Fed’s decision to keep rates steady is still positive news for the markets. By providing support in the form of steady rates, the Fed is showing that they are committed to aiding the economy’s recovery. The steady rate also provides some much-needed stability for investors and businesses alike.
The Federal Reserve’s move on Wednesday shows that they are dedicated to keeping financial markets stable even in the face of cooling inflation rates. In addition to their stability, the Fed’s decision to keep borrowing costs low also indicates that they are still prepared to intervene should the economy need further support.
