The U.S. Central Bank, the Federal Reserve (Fed), kept the benchmark interest rate unchanged at 3.50–3.75% on the 18th (local time). As a result, the interest rate gap with Korea (2.5% annually) remained at 1.25 percentage points at the upper end.
At the Federal Open Market Committee (FOMC) regular meeting that ended that day, the Fed decided to keep the benchmark rate at this level with 11 votes in favor and 1 against. The Fed cut the benchmark rate by 0.25 percentage points in September, October and December last year, but has held rates steady twice in a row this year, following January.
In its statement, the Fed said, "Economic activity is expanding at a solid pace, but inflation remains somewhat elevated," and noted, "It is uncertain how developments in the Middle East (the war between the United States and Israel and Iran) will affect the U.S. economy."
In the dot plot that drew market attention, the Fed presented a year-end median policy rate of 3.4%. The dot plot is a chart that marks with dots the future rate levels anonymously projected by 19 Fed Commissioners and suggests the possibility of about one additional rate cut this year.
This rate outlook is not much different from three months ago, but there were some changes in the distribution of the dot plot, which shows the Commissioners' views. In December last year, 7 Fed Commissioners expected to hold (4) or raise (3) the benchmark rate through the end of this year, while 12 projected cuts. This time, projections for rate hikes disappeared, with 7 favoring holding at the current level and 12 projecting cuts.
There were also some changes in the outlook for economic indicators. In the projections released that day, the Fed slightly raised this year's growth forecast to 2.4% from 2.3% and kept the unemployment rate forecast at 4.4% at year-end. By contrast, it raised the projection for the personal consumption expenditures (PCE) price index—one of the key gauges for rate decisions—to 2.7% this year from 2.4%.