The US Federal Reserve kept interest rates unchanged today, Wednesday, but indicated in new economic forecasts that borrowing costs are likely to rise by another half a percentage point by the end of this year due to a stronger-than-expected economy and sluggish inflation decline. Federal Reserve Chairman Jerome Powell noted that the bank has made significant progress in fighting inflation, pointing out that "almost all policymakers see it as appropriate to raise rates this year." He discussed "ongoing inflationary pressures," stating that "getting inflation back to 2% has a long road ahead," and that it will take time to see the full effects of monetary tightening.
In an effort to balance the risks facing the economy and the ongoing battle to curb inflation, the Federal Open Market Committee, which sets the interest rate, said in a final statement following its two-day meeting, "Keeping the target range (for interest rates) unchanged at this meeting allows the committee to assess any additional information and its implications for monetary policy." The committee reached its decision unanimously.
They added that further increases in interest rates will "consider the cumulative tightening of monetary policy, the impact of monetary policy that leads to slower economic activity and inflation, as well as economic and financial developments." The new forecasts, which lend a hawkish tone to today's interest rate decision, indicate that policymakers expect, on average, to raise the benchmark overnight interest rate from the current range of 5 to 5.25 percent to a range of 5.50 to 5.75 percent by the end of the year.
