Imagine a domino effect. A single domino can trigger a chain reaction that affects all the others along the way. This is how monetary policy works in the United States, and the recent decision by the Federal Reserve (Fed) to keep interest rates between 4.25% and 4.5% is not just a number – it is a powerful signal for the global economy.

Whether you are a businessperson, a consumer or someone who pays attention to economic changes, understanding the impact of this decision is essential to keeping up with the direction of the global economy. After all, when the Fed decides to maintain, raise or lower interest rates, this affects everything from food and fuel prices to international financial markets.

Fed Keeps Interest Rates the Same, but Reduces Pace of Quantitative Tightening

At the Federal Open Market Committee (FOMC) meeting, the Fed chose to keep interest rates in the range of 4.25% to 4.5%, as expected by the market.

However, the big news came in the decision to reduce the pace of reduction of the central bank’s balance sheet, a process called Quantitative Tightening (QT). In practice, this means that the Fed will start selling fewer government bonds on the market, reducing the impact of the withdrawal of liquidity from the economy.

Starting in April, the sale of US Treasury bonds will be reduced from US$25 billion to US$5 billion per month, while mortgage bonds will remain at US$35 billion per month. This indicates a more cautious approach by the Fed, which needs to balance fighting inflation without causing an excessive slowdown in the economy.

Economic Uncertainty Grows: What Did the Fed Say?

In its official statement, the Federal Reserve highlighted that economic uncertainty has increased. The central bank is closely monitoring the risks to its dual mandate: price stability and full employment.

This warning is not just rhetorical. According to the economic projections released by the Fed, the coming years may bring more modest growth for the United States:

• GDP: The estimate fell from 2.1% to 1.7% in 2025 and continues to trend downward in the following years.

• Unemployment: The unemployment rate is expected to rise to 4.4% in 2025, remaining above the current level.

• Inflation: The PCE, the Fed’s preferred indicator, had its projection raised to 2.7% in 2025, above the 2% target.

These figures show that, although inflation remains under control, economic growth may slow down in the coming years.

Why Are US Interest Rates So Important?

Those who think that US interest rates only affect Americans are mistaken. In fact, this decision has global implications and can directly influence:

• Exchange Rates: The dollar tends to strengthen when US interest rates are high, impacting emerging market currencies.

• Credit and Financing: Companies and governments around the world need to make decisions based on the cost of money.

• Stock Exchanges: Traders reevaluate their portfolios in light of the prospects of future interest rate cuts or hikes.

When US interest rates rise, the cost of money increases globally, making credit more expensive. This can affect companies that depend on financing and emerging countries that have debts in dollars.

What Does This Decision Mean for You?

Keeping interest rates unchanged in the US may seem like a technical decision, but its impacts go far beyond that. It influences the prices you pay at the supermarket, the value of the dollar, your country’s economy, and even your business opportunities.

With economic uncertainty growing, it is recommended to pay attention to the upcoming Federal Reserve meetings. Any change in tone in the central bank’s speech can affect global markets and alter the economic scenario for the coming years.

Whether you are a trader, entrepreneur, or consumer, understanding how the world reacts to the Fed’s decisions can make all the difference in how you plan for the future.

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