The Federal Reserve (FED) did not surprise markets and decided to stop raising interest rates for the third time in a row, keeping levels in a range of 5.25 percent to 5.5 percent. It announced staying the course of monitoring the impact of the monetary tightening path that began around mid-2022.
The US Federal Reserve stopped raising interest rates at the July and August meetings after spiking it 10 times in a row.
Despite inflation being at high levels, and far from its target of 2%, the Fed attributed the pause in rate hikes as providing an opportunity for gaging the impact of monetary tightening on the data of the US economy, according to a statement issued Wednesday after the end of the two-day meeting of the Open Market Committee.
The FOMC said in a statement that “inflation remains very high.” The statement included forecasts of stronger economic and job growth than previous forecasts, taking into account the prospects for a “soft landing” of the economy.
A raft of positive economic data has revived hopes that policymakers will slow the pace of price increases without triggering a recession.
In addition to its interest rate decision, the Federal Open Market Committee, which sets the interest rate, updated members’ expectations on a range of economic indicators, as well as expectations for future monetary policy.
Read: Oil prices decline ahead of Fed’s decision, heightening uncertainty
Committee members left the average forecast for interest rates between 5.50 percent and 5.57 percent, while maintaining the possibility of raising interest rates by another quarter of a percentage point before the end of the year.
They also raised next year’s interest rate forecast by half a percentage point, suggesting that the Federal Reserve expects interest rates to remain much higher for longer in order to bring inflation down to the set target.
Federal Reserve Chairman Jerome Powell warned that the central bank’s new forecast, which shows tightening in monetary policy will remain longer, is not an action plan.
Regarding the new interest rate outlook, he said, “I don’t want to label it really a plan,” but instead reflect officials’ view that the economy will perform better than they expected a few months ago.
Powell, speaking after the FOMC meeting which kept interest rates steady with another hike expected later in the year, said officials would continue to hold “meeting after meeting” on rates and “are ready to raise rates further if that is favorable.”
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