The US Federal Reserve on Wednesday left interest rates unchanged for the second consecutive time in its two-year fight against inflation but left room for a hike if needed later in the year.
The rates will hold in the 5.25 per cent and 5.5 per cent range as a result of hikes that started in March 2022 in an attempt to bring inflation down to below the acceptable rate of 2 per cent.
Price rate increases have decelerated to 3.4 per cent as of last September, coming down from the peak of 7 per cent.
In a note released after its top decision-making body, the Fed said the economy was growing at a “strong pace” compared to the “solid pace” as it described it after its September meeting. The next meeting of the fed is in December.
“The full effects of our tightening have yet to be felt,” Jerome H. Powell, the Fed chair, told reporters after the body’s meeting. “Given how far we have come, along with the uncertainties and risks that we face, the committee is proceeding carefully.”
The Fed has been trying to cool demand for goods by raising interest rates, which impacts everything from the purchase of homes to cars, which in turn should force producers to produce less and raise prices less quickly.
The danger in the strategy, which has dogged the Fed at every stage, was that the economy could be slowed into recession. While it has managed to keep recession at bay, the Fed acknowledged that the “tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation”.
The Fed has been working towards a “soft landing” of the economy from record inflation which had peaked at a 40-year hike as the US economy was recovering from the aftereffect of the Covid-19 pandemic, worsened by steady hikes in the price of gas and oil. Prices at the gas pump and in grocery stores became the most visible signs of inflation, which has played havoc with President Joe Biden’s approval ratings, together with other factors.
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