US interest rate cut in June seems off the table: Moody's

Rating agency Moody's believes an interest rate cut during the US Federal Reserve's June meeting is likely off the table given stubborn inflation in the country.

"The...increase in the headline CPI in March likely puts to bed hopes that June's Federal Open Market Committee meeting would usher in the first interest rate cut," Moody's said in a report.

March's increase in inflation surpassed expectations of a 0.3 per cent increase and lifted the annual rate from 3.2 per cent to 3.5 per cent, its highest since September, noted Moody's.

This assertion by the global rating agency comes soon after the US reported more than-expected inflation figures in March.

On Wednesday, the latest data showed inflation in the US increased more than expected in March, putting cold water to hopes of an interest rate cut shortly.

In the 12 months through March, the inflation increased 3.5 per cent year-on-year, the highest in about 6 months. This followed a 3.2 per cent rise in February.

US Federal Reserve officials also expect it would not be appropriate to reduce the key interest rate until they gain "greater confidence" that inflation is moving sustainably toward a comfortable 2 per cent, minutes of its latest monetary policy meeting showed.

The minutes, released overnight Indian Standard Time, noted that the US central bank officials affirmed their strong commitment to returning inflation to the committee's 2 per cent objective.

Consumer price inflation in the US continued to trend down, though it remained above 2 per cent.

The US Federal Reserve, in its March meeting, voted to leave the key interest rate unchanged at 5.25-5.50 per cent, keeping the policy rate unchanged for the fifth straight time on the trot.

During the COVID-19 pandemic, the interest rates were near zero.

Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline. 

Catch the latest stock market updates here. For all other news related to business, politics, tech and auto, visit Zeebiz.com.