The US Federal Reserve voted Wednesday to keep interest rates at a 22-year high, while forecasting an additional rate hike before the end of the year to bring down inflation.
The Fed’s decision to keep its key lending rate between 5.25 percent and 5.50 percent gives policymakers time to “assess additional information and its implications for monetary policy,” the central bank said in a statement.
After 11 interest rate hikes since March last year, inflation has fallen sharply but remains stubbornly above the Fed’s long-run target of two percent per year — keeping pressure on officials to consider further policy action.
On Wednesday, the Fed said economic activity had been expanding “at a solid pace,” while noting strong job gains and a low unemployment rate.
A recent string of positive economic data has raised hopes that policymakers can slow price increases without triggering a damaging recession.
Alongside its interest rate decision, the rate-setting Federal Open Market Committee (FOMC) also updated members’ forecasts for a range of economic indicators, as well as expectations of future monetary policy.
FOMC members left the median projection for interest rates between 5.50 percent and 5.75 percent, keeping alive the possibility of another quarter percentage point hike before year-end.
They also lifted expectations for interest rates next year by half a percentage point, suggesting the Fed anticipates rates will have to stay significantly higher for longer in order to lower inflation to target.
FOMC members more than doubled the median projection for economic growth this year as well to 2.1 percent, from 1.0 in June, and sharply raised their forecast for next year.
The prediction for the unemployment rate in 2023 was lowered slightly from June, suggesting the jobs market is faring better than hoped, while the expectation for headline inflation was increased slightly.
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