The US central bank broke the rate-hiking spree as it left the interest rates unchanged in its latest rate-setting meeting on Wednesday. It was for the first time after March 2022 that the Federal Reserve had refrained from hiking the benchmark rates, ending a stream of 10 consecutive hikes.
In its latest meeting, the US Federal Reserve decided to maintain the key borrowing rate in a target range of 5%-5.25%.
Seeking Additional Information
The Federal Open Market Committee said that holding the target range steady at this meeting allowed it to assess additional information and its implications for monetary policy.
"We didn't make any decision about going forward including what would happen at the next meeting. We didn't decide or really discuss anything about 'going to every other meeting' kind of approach," Fed chair Jerome Powell said.
However, the central bank hinted that more rate hikes are not ruled out in the future as the Fed continues its fight to curb inflation within the target levels.
"In determining the extent of additional policy firming that may be appropriate to return inflation to two per cent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments," the Federal Reserve said in a statement as it concluded the two-day policy meeting.
Growth and Emplpoyment
Powell also remarked that the US growth and the job market are holding up better than expected.
According to Powell, the decision not to raise the rate at this point will leave the Fed with the space and time to figure out the impact of the rate-hike regime on inflation. The Fed will garner more information as it decides if rates are to be increased. "We have to get inflation level at 2% and we will," said Powell.
The Federal Reserve also appeared to say that the raging fears of a US recession have alll but receded. It commented that growth estimates moved up a bit while unemployment estimates moved down a bit. However, inflation estimates moved up, the Fed chairman said.
Fight Against Inflation
The aggressive US rate hikes had triggered recession fears as the fight on inflation deprived markets of the access to cheaper funds, crippling the market. However, more recently, economists and bankers have exuded confidence that a recession may not occur in the US economy.
"The conditions we need to see ... to get inflation down are coming into place ...But the process of that actually working on inflation is going to take some time," Powell said.
"We have raised our policy interest rate by five percentage points, and we've continued to reduce our security holdings at a brisk pace. We've covered a lot of ground and the full effects of our tightening have yet to be felt," said Fed Chair Jerome Powell following the central bank decision," Powell concluded.
