The US central bank last night kept interest rates at their highest level in 22 years, but left the door open to further increases in the battle to reduce inflation, and downplayed any prospect of a cut soon.
The US Federal Reserve rate was left in a range of 5.25 percent to 5.5 percent, the second pause after aggressive increases since early 2022.
Markets are watching for clues about where the Federal Reserve will go amid signs that higher borrowing costs are putting pressure on households and businesses in the world’s largest economy.
Cautious: US Federal Reserve Chair Jerome Powell (pictured) dismissed speculation that leaving rates unchanged for now meant another hike was less likely
Federal Reserve Chair Jerome Powell dismissed speculation that leaving rates unchanged meant another hike was less likely, saying: “The idea that it would be difficult to raise again after pausing for one or two meetings simply it is not correct”.
Inflation in the United States has fallen from 9.1 percent to 3.7 percent, but is still well above the Federal Reserve’s 2 percent target.
And the bank said that with economic activity and the labor market “strong” and inflation “elevated”, it was still considering “the extent of further policy tightening” that might be necessary.
Powell said the rate-setting committee was “not thinking about rate cuts at this time.” The question was ‘should we walk more?’
The Bank of England’s interest rate decision today is expected to keep rates unchanged for the second time in a row.
Andrew Hunter, deputy chief US economist at Capital Economics, said: “The Federal Reserve remains in wait-and-see mode.”
“We suspect data in the coming weeks will see the case for a final hike continue to erode, and the Fed is likely to start cutting rates again in the first half of next year.”