U.S. Fed Holds Key Interest Rate, Continues To Signal Cuts This Year
The Fed says risks to goals are moving into 'better balance' but it won't be appropriate to ease policy till inflation cools sustainably.
The U.S. Federal Reserve kept its key interest rate steady for the fourth straight time and signalled cuts this year but indicated that it is not in a rush to ease policy.
The Federal Open Market Committee unanimously decided to hold its key interest rate at 5.25-5.5% in January, citing slowing economic activity, and easing but elevated inflation, according to its statement on Wednesday night. The Fed also removed any reference to future rate hikes.
"The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance," said the FOMC statement. "The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks."
Fed chair Jerome Powell said in the press conference that the U.S. central bank believes that the "policy rate is likely at its peak for the cycle". It will be "appropriate to dial back at some point this year", he said, but added that the Fed is prepared to hold rates for longer if appropriate.
The committee will continue to assess additional information and its implications for monetary policy, the Fed statement said. But a rate cut won’t be appropriate until it gains more confidence that “inflation is moving sustainably toward 2%”, it said.
The central bank had hiked the rates by 25 basis points in July, which took the benchmark rate to its highest in 22 years. In September, November and December, it kept them unchanged.
