The U.S. Federal Reserve held its key interest rate steady, in line with expectations, as it kept the door open for another hike this year to cool inflation.
The Federal Open Market Committee decided to hold its key interest rate at 5.25-5.5% in November in a unanimous decision, according to its statement on Wednesday night. 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, it maintained a status quo.
"Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation," the Fed said in its policy statement. "The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks."
In assessing the appropriate stance of monetary policy, the committee will continue to monitor the implications of incoming information for the economic outlook, it said.
"Economic activity is expanding at a strong pace, nominal wage growth is showing signs of easing, labour market is still tight, but coming into better balance," Fed Chair Jerome Powell said in a press conference after the rate decision. There is "still a long way to go" to bring inflation down to 2%, he said.
The economy has been surprisingly resilient, he said, adding that recession has not been put back into the forecast. "FOMC is not thinking or talking about rate cuts right now."
Rate hikes take time to reflect in the economy as "we are seeing effects of 2022 hikes only now", Powell said.
He, however, cautioned that evidence of persistent above-potential growth could warrant a hike.
The Fed is also attentive to increase in long-term yields but "not confident if we have reached the stance to achieve the 2% goal", he said. But expectations of higher Fed rates are not driving the long-term yield rise, he said.
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