The US Federal Reserve made the decision to maintain its current interest rates for the second time in a two-year effort to combat inflation, while still keeping the option open for potential rate hikes later this year.
Interest rates will remain within the range of 5.25 percent to 5.5 percent, following a series of rate increases that began in March 2022, aimed at curbing inflation and bringing it below the target rate of 2 percent. Inflation had reached a peak of 7 percent but had decelerated to 3.4 percent as of September.
In a statement released after its latest meeting, the Fed acknowledged that the economy was growing at a "strong pace," an upgrade from the "solid pace" it had described in its previous meeting held in September. The next meeting of the Federal Reserve is scheduled for December.
Federal Reserve Chair, Jerome H. Powell, noted, "The full effects of our tightening have yet to be felt. Given how far we have come, along with the uncertainties and risks that we face, the committee is proceeding carefully."
The Federal Reserve has been working to dampen demand for goods by raising interest rates, impacting various sectors, including housing and automotive industries, with the aim of reducing production and slowing down price increases. However, the strategy comes with the risk of potentially slowing the economy to the point of recession. The Fed acknowledged that "tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation."
The Fed's goal has been to achieve a "soft landing" for the economy, cooling off record-high inflation that had peaked at levels not seen in 40 years as the US economy was recovering from the aftermath of the Covid-19 pandemic, aggravated by rising gas and oil prices. The visible signs of inflation, such as gas and grocery store prices, have had significant implications for President Joe Biden's approval ratings, among other factors.
(With Agency Inputs)
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