(CTN News) – On Wednesday, the US Federal Reserve kept interest rates at a 22-year high as inflation continues to decline from its highest level in more than a decade, at its highest level since the 1970s.
Powell, the chairman of the Federal Reserve, cautioned that the Fed’s campaign to bring down price growth has “a long way to go” as it left the door open to further rate hikes in the future.
In spite of the fastest rate rises in 40 years, policymakers are closely monitoring the strength of the world’s largest economy, which has been surprisingly resilient despite facing the fastest string of rate increases in four decades.
As a result of a two-day policy meeting, the Federal Reserve chose to maintain its benchmark federal funds rate at a range between 5.25% and 5.5%.
As part of Powell’s remarks, he stressed that the central bank remains “strongly committed” to the goal of lowering inflation.
It has emerged over the past few months that economic activity has been expanding at a strong pace – well above earlier expectations, he told a news conference last week.
Earlier this year, the officials of the Federal Reserve embarked upon an aggressive campaign against inflation. The last time they raised interest rates was in July, and since then, they have decided to wait and see whether they have done enough to warrant an increase.
According to recent indicators, the economy expanded at a strong pace in the third quarter of this year, according to a statement issued by the Federal Reserve. “Job growth has moderated since early this year, but it remains strong, and unemployment has remained low throughout the year.
Inflation continues to be elevated.”
Despite a marked decline from the peak of 9.1% in June 2022, September’s US consumer price index still showed inflation rising at 3.7% on the year, which is significantly above the Federal Reserve’s medium-term inflation target of 2%.
At the same time, the country’s economy has experienced its fastest growth in almost two years. The third quarter’s gross domestic product increased by 4.9% on an annualized basis.
In September, the labor market added 336,000 jobs, while the unemployment rate remained unchanged at 3.8%. Friday’s non-farm payroll data will provide the latest indication of the labor market’s health.
According to Powell, officials are “not confident” that the Federal Reserve has raised interest rates as high as they need to be. As far as future meetings are concerned, no decisions have been made.”
A rate-setting meeting is scheduled for 12 December between policymakers.
According to Nancy Vanden Houten, head of US economics at Oxford Economics: “We do not anticipate any further Fed rate increases, but the risks continue to be tilted in that direction.”.
A slower rate of job and wage growth is needed to convince the Federal Reserve that inflation is on a sustainable path back to 2%.