The US Federal Reserve (Fed) kept its benchmark interest rate unchanged for the third straight meeting as policymakers remained cautious over persistent inflation and awaited a leadership transition.
The rate-setting Federal Open Market Committee (FOMC) decided to keep the benchmark interest rate unchanged at 3.50 per cent to 3.75 per cent range, in line with market expectations. Prior to the two-day FOMC's meeting, which concluded on April 29, Chicago Mercantile Exchange's FedWatch Tool showed a 100 per cent chance that the US Fed will maintain status quo.
The meeting was likely the last one chaired by Jerome Powell, who is set to step down as Fed Chair on May 15. However, he announced that he will continue on the US Fed's Board of Governors until the US Department of Justice's investigation into him is "well and truly over."
Powell said the US economy is expanding but "inflation has moved up with growing global energy prices" as developments in West Asia have added uncertainty.
What US Fed's Decision Means For Indian Markets
Higher energy prices due to the US-Iran conflict are increasing fuel costs and household expenses. In view of the uncertain situation, the US Fed was left with no choice but to leave interest rates unchanged and adopt a wait-and-watch approach.
Central banks usually raise interest rates when inflation is high to reduce spending and encourage savings. This helps slow down rising prices. When the economy is weak, they usually cut rates to boost spending, investment, job creation and growth.
How Have Domestic Markets Reacted To US Fed's Decision Today
Domestic equities saw a broad-based sell-off on April 30, a day after the US Fed's decision. Benchmark indices slipped more than 1.50 per cent, as of the mid-session.
As of 12:30 PM, the 30-share BSE Sensex, had lost as much as 1,237.50 points, or 1.59 per cent, to hit an intraday low of 76,258.86. Likewise, the NSE Nifty 50 tumbled 380.80 points, or 1.57 per cent, to the day's low at 23,796.85.
This is a developing story...
