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U.S. Federal Reserve holds rates but signals likelihood of another hike this year

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The U.S. Federal Reserve left its key interest rate unchanged Wednesday for the second time in its past three meetings, a sign that it’s moderating its fight against inflation as price pressures have eased. But Fed officials also signaled that they expect to raise rates once more this year.

The move to leave its benchmark rate at about 5.4 per cent suggests that the Fed thinks it has time to wait and see if the 11 rate hikes it unleashed starting in March 2022 will continue to cool rising prices.

Besides forecasting another hike by year’s end, their projections showed they envision keeping rates high deep into 2024. They expect to cut interest rates just two times in 2024, down from four rate cuts they had envisioned back in June. The Fed’s rate hikes have significantly raised the costs of consumer and business loans. In fine-tuning its interest rate policies, the central bank is trying to guide the U.S. economy toward a tricky “soft landing” of cooling inflation without triggering a deep recession.

 

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