America’s central bank last night held interest rates at a 22-year high but left the door open for more hikes in the battle to bring down inflation – and played down any prospects of a cut soon.
The US Federal Reserve’s rate was left in a range of 5.25 per cent to 5.5 per cent, the second pause after aggressive rises since early 2022.
Markets are closely watching for clues about where the Fed will go next amid signs that higher borrowing costs are putting strain on households and businesses in the world’s largest economy.
Cautious: US Federal Reserve chairman Jerome Powell (pictured) brushed off speculation that leaving rates on hold for now meant another hike was less likely
Fed chairman Jerome Powell brushed off speculation that leaving rates on hold meant another hike was less likely, saying: ‘The idea that it would be difficult to raise again after stopping for a meeting or two is just not right.’
Inflation in the US has fallen from 9.1 per cent to 3.7 per cent but is still well above the Fed’s 2 per cent target.
And the bank said that with economic activity and the jobs market ‘strong’ and inflation ‘elevated’ it continued to consider ‘the extent of additional policy firming’ that may be needed.
Powell said the rate-setting committee was ‘not thinking about rate cuts right now’. The question was ‘should we hike more?’
Today the Bank of England’s interest rate decision is expected to see rates left on hold for the second time in a row.
Andrew Hunter, deputy chief US economist at Capital Economics, said: ‘The Fed remains in wait-and see-mode.
‘We suspect the data over the coming weeks will see the case for a final hike continue to erode, with the Fed likely to start cutting rates again in the first half of next year.’
