Interest Rate in USA
USA - Interest Rate
Fed keeps rates at effective floor in June; projects earlier rate hike
At its meeting on 15–16 June, the Federal Open Market Committee (FOMC) decided to hold the target range for the federal funds rate at its effective floor of 0.00%–0.25%. Moreover, the Fed reaffirmed its commitment to using its full range of powers to support the economic recovery at its current pace. The decision was widely anticipated by market analysts.
The Fed kept the target range unchanged due to the economic fallout caused by the ongoing public health crisis. Despite economic activity continuing to gain momentum in recent months amid ample fiscal stimulus, employment is expected to remain below its pre-pandemic levels in the short term and the sectors most affected by Covid-19-related restrictions remain hampered, albeit they are showing some signs of improvement as containment measures continue to loosen. Moreover, the recent jump in inflation, which came in notably above the Fed’s 2.0% target rate in April and May, seems to have been predominately driven by transitory factors. Furthermore, in order to ensure sufficient liquidity for households and businesses and the effective transmission of monetary stimulus to broader financial conditions, the Fed reaffirmed its commitment to increase its purchases of Treasury securities, and agency residential and commercial mortgage-backed securities, at least at the current pace of USD 80 billion per month and USD 40 billion per month, respectively. Additionally, the Bank will continue to offer large-scale overnight and term repurchase agreement operations.
Looking ahead, the Fed reaffirmed it will likely keep the target policy rate at its current level until “labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time”. However, while the Committee maintained its unemployment forecast for this year at 4.5%, it raised its median GDP growth projection for 2021 to 7.5% from its previous forecast of 6.5%. Notably, the Fed also moved forward its median projection for hiking rates, which markets viewed as a hawkish move. Currently, all of our panelists see the federal funds target rate ending this year at 0.25% and the majority see the first hike in 2023.
Commenting on June’s meeting, James Orlando, senior economist at TD Economics, noted:
“The median of the FOMC [changed] its view, moving forward the first rate hike to 2023. Previously, only a minority of the Fed thought this would happen. The shift to a more hawkish Fed is underway. We think there is more to come. While 13 members think the first hike will happen in 2023, 7 members see it happening in 2022. With the economic recovery set to continue at a torrid pace, more Fed members are likely to continue to signal an earlier start to the rate hiking cycle. This should be the impetus for higher bond yields going forward.”
The next FOMC meeting is scheduled for 27–28 July.
FocusEconomics Consensus Forecast panelists project the federal funds target rate to end 2021 at 0.25% and 2022 at 0.29%.
United States - Interest Rate Data
|Policy Interest Rate (%)||0.50||0.75||1.50||2.50||1.75|
5 years of economic forecasts for more than 30 economic indicators.
United States Interest Rate Chart
United States Facts
|Bond Yield||1.92||-0.43 %||Dec 31|
|Exchange Rate||1.12||0.65 %||Dec 31|
Get a sample report showing our regional, country and commodities data and analysis.
Request a Trial
Start working with the reports used by the world’s major financial institutions, multinational enterprises & government agencies now. Click on the button below to get started.
July 16, 2021
Retail sales increased 0.6% month-on-month in seasonally-adjusted terms in June (May: -1.7% mom).
July 13, 2021
Consumer prices rose a seasonally-adjusted 0.90% in June over the previous month, picking up from the 0.64% rise recorded in May.
July 2, 2021
Total non-farm payrolls increased by 850,000 in June, a solid reading that beat analysts’ expectations of a 700,000 increase.
July 1, 2021
The Institute for Supply Management (ISM) manufacturing index ticked down to 60.6 in June from 61.2 in May, nevertheless the index remained well-above the 50-threshold that separates expansion from contraction in the manufacturing sector. June’s slightly weaker expansion was the result of slower growth in new orders, while employment levels dipped relative to the previous month.
June 29, 2021
The S&P/Case-Shiller 20-city composite home price index increased 2.1% month-on-month in April, after March’s 2.2% rise.