The US Federal Reserve has left rates unchanged at 5.25%-5.50%, the highest since 2001. This comes in its fight to reduce inflation to its 2% target.

“The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%,” the FED issued in a statement.

FED chair Jerome Powell pushed back against speculations of a rate cut in March by saying that would probably not be the most likely case and that the committee would not likely reach a level of confidence by the March meeting to warrant rate cuts.

 deVere CEO Nigel Green commented,

 “We fully expected that the Fed would hold rates steady. Wall Street and markets around the world will, of course, be looking for clues on shifts in the central bank’s policy stance in Chair Powell’s remarks after the meeting. However, investors should not expect too many hints. We expect he will remain cautious about the future of potential rate cuts and want to see more evidence that the battle against inflation is won. He’ll want to avoid cutting them prematurely and face the threat of inflation rising again. He will almost certainly push back against those market expectations of five cuts this year.”

The Federal Reserve has spent almost two years hauling up interest rates to cool multi-decade high inflation – and it appears to be working with steadily cooling price increases.

Nigel goes on to say that two factors could now be playing on the officials’ minds. Consumer spending continues to be surprisingly robust, and second, heightening tensions in the Middle East, especially on the critical Red Sea global shipping route, could potentially trigger a second wave of inflation in 2024.

Powell concluded that the six months of data showing that the FED’s preferred inflation gauge is below the central bank’s target has been promising, but he would like to see more evidence to confirm what the stats reveal.

The FED seems well on its way in the struggle to bring inflation down. Investors predict that the first rate cut will now be imminent in May instead of March.

Investors should remain cautious and remain diversified.