The Federal Reserve System (the Fed) has maintained the federal funds interest rate target range at 5.25%-5.50%, the highest level in 23 years, since its last rate hike in July 2023. This decision reflects the Fed's cautious attitude and long-term considerations in the current economic environment.

The core position of the Federal Reserve can be summarized in the following points:

First of all, controlling inflation remains the top priority. Although the inflation rate has significantly decreased from the peak of 9.1% in 2022, the latest data indicates that the downward trend in inflation has stalled, particularly in the service sector where inflation remains stubbornly high. The Federal Reserve believes that the current high Interest Rate policy is effectively cooling the economy, but more time and evidence are needed to confirm that inflation has been fully controlled.

Secondly, the Federal Reserve remains highly vigilant about the risks of premature rate cuts. Federal Reserve officials repeatedly emphasize that the risks associated with cutting rates too early far outweigh the risks of maintaining high Intrerest Rates for a longer period. Premature rate cuts could lead to a resurgence of inflation, or even uncontrollable inflation, which would undermine previous rate hike efforts, severely damage the credibility of the Federal Reserve, and potentially force more aggressive and destructive rate hikes in the future. In contrast, while maintaining high Intrerest Rates may somewhat suppress economic growth and lead to a slight increase in the unemployment rate, the Federal Reserve believes this is the necessary price to ensure inflation returns to the 2% target.

Finally, the Federal Reserve emphasized that future interest rate decisions will heavily rely on economic data rather than a predetermined path. They are particularly focused on data from two key areas: first, inflation data, especially the core Personal Consumption Expenditures (PCE) price index; second, labor market data, including indicators such as job growth, unemployment rate, and wage growth.

This cautious attitude reflects the Federal Reserve's efforts to seek a balance between maintaining economic stability and controlling inflation. Although a high Intrerest Rate environment may put pressure on certain economic sectors, the Federal Reserve believes it is necessary to ensure the long-term health of the economy. As more economic data is released, we will be able to see more clearly the effects of Federal Reserve policies and their future direction.