US Federal Reserve warns of further rate hikes after pause
Last night, the US Federal Reserve signaled that it was not done raising interest rates – and that they would stay high for longer – even as it left them on hold for the moment.
The U.S. central bank is trying to steer the world’s largest economy toward a so-called “soft landing,” where inflation is controlled without triggering a recession.
But projections released by the Federal Reserve along with its decision showed that it still expects one more hike this year and that it expects rates to fall more slowly next year than before.
Cautious: US Federal Reserve Chairman Jerome Powell (pictured) said the process of reducing inflation to its 2% target still had a ‘long way to go’
Federal Reserve Chair Jerome Powell said the process of reducing inflation to its 2 percent target still had a “long way to go,” adding: “We want to see compelling evidence that we have reached the appropriate level.” .
The decision to leave rates unchanged was widely expected and comes after recent figures showed signs of a cooling labor market in the world’s largest economy, with unemployment rising.
However, the Federal Reserve has revised upward its GDP growth expectations amid “robust” consumer spending.
Pantheon Macroeconomics’ Ian Shepherdson described the rate decision as an “aggressive hold” but suggested the inflation and unemployment numbers might not turn out as the Fed expects.
“Policymakers are determined not to claim victory until they are sure inflation has been defeated,” he said.