US Fed pauses rate hikes but signals more tightening ahead

The US Federal Reserve voted Wednesday to pause its aggressive campaign of interest rate hikes despite “elevated” inflation, while indicating that another sharp increase could be needed before year-end.

After 10 straight increases since March 2022, the Fed’s rate-setting committee voted to hold its benchmark lending rate between 5.0 percent and 5.25 percent, the central bank said in a statement.

Despite the Fed’s aggressive campaign of monetary tightening, annual inflation remains stubbornly above its long-term target of two percent, while unemployment is close to record lows.

Holding interest rates steady gives policymakers on the Federal Open Market Committee (FOMC) time “to assess additional information and its implications for monetary policy,” the Fed said.

The move was broadly in line with analysts’ expectations.

However, FOMC members hinted that more monetary tightening lies ahead. They raised the median projection for the Fed’s benchmark lending rate at the end of this year by another half percentage-point.

The US economy has shown signs of slowing, with the Fed recently forecasting a mild recession to begin later this year.

But the central bank said Wednesday that recent indicators suggest “economic activity has continued to expand at a modest pace.”

The Fed also released an updated economic forecast, lifting its 2023 GDP growth projections to 1.0 percent from 0.4 percent in March.


© Agence France-Presse