The Federal Reserve officials have announced a pause in interest-rate hikes, leaving rates at 5% to 5.25% after more than a year of consecutive rate increases.
The decision, made by the Fed’s Federal Open Market Committee (FOMC), marks a shift in how Fed officials view the state of inflation, which reached a 40-year high of 9.1% in June last year as food and energy costs soared. Inflation in May was down to 4%, the lowest since April 2021.
The FOMC said in a statement: “Holding the target range steady at this meeting allows the committee to assess additional information and its implications for monetary policy … In assessing the appropriate stance of monetary policy, the committee will continue to monitor the implications of incoming information for the economic outlook.”
Even with the pause, Fed officials suggest further increases may come depending on how close the economy gets to their target of 2% inflation. Interest rates make borrowing money, particularly for mortgages or other loans, like car payments and student loans, more expensive.
At a press conference Wednesday following the Fed’s announcement, chair Jerome Powell said that further rate increases are likely.
“Looking ahead, nearly all committee participants view it as likely that some further rate increases will be appropriate this year to bring inflation down to 2% over time,” Powell said, before warning that inflation was still an ongoing problem in the US economy.
He added: “Inflation has moderated somewhat since the middle of last year, nonetheless, inflation pressures continue to run high and the process of getting inflation down to 2% has a long way to go.”
The Fed is closely watching core inflation, which measures the price increases of goods and services excluding the volatile food and energy sectors, which have remained relatively stable over the last few months, even as the overall inflation rate has fallen.
