The Federal Reserve left its benchmark interest rate unchanged while signaling borrowing costs will likely stay higher for longer after one more hike this year.
The U.S. central bank’s policy-setting Federal Open Market Committee, in a post-meeting statement published Wednesday in Washington, repeated language saying officials will determine the “extent of additional policy firming that may be appropriate.”
Fed Chair Jerome Powell said officials are “prepared to raise rates further if appropriate, and we intend to hold policy at a restrictive level until we’re confident that inflation is moving down sustainably toward our objective.”
The FOMC held its target range for the federal funds rate at 5.25% to 5.5%, while updated quarterly projections showed 12 of 19 officials favored another rate hike in 2023, underscoring a desire to ensure inflation continues to decelerate.
“We are committed to achieving and sustaining a stance of monetary policy that is sufficiently restrictive to bring inflation down to our 2% goal over time,” Powell said at a press conference following the decision.
He emphasized the Fed will “proceed carefully” as it assesses incoming data and the evolving outlook and risks, echoing remarks he made at the Fed’s annual symposium in Jackson Hole, Wyoming last month.
After raising rates rapidly last year, “now we’re fairly close, we think, to where we need to get,” Powell said.
Fed officials also see less easing next year, according to the new projections, reflecting renewed strength in the economy and labor market.
They now expect it will be appropriate to reduce the federal funds rate to 5.1% by the end of 2024, according to their median estimate, up from 4.6% when projections were last updated in June. They see the rate falling thereafter to 3.9% at the end of 2025, and 2.9% at the end of 2026.
Yields on two-year U.S. government bonds rose after the decision, while the dollar pared declines against major peers and the S&P 500 index of stocks erased earlier gains.
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