US Federal Reserve leaves target interest rate unchanged

The US Federal Reserve (Fed) has held its target interest rate unchanged, signaling that most policymakers expect one more rate hike this year to tame inflation. The Federal Open Market Committee (FOMC) held the federal funds target rate at 5.25-5.5pc, the highest in 22 years. The Fed has been battling to rein in inflation that surged to a four-decade high of 9.1pc in June last year. Fed chief Jerome Powell said that they will continue to make decisions meeting by meeting, depending on incoming data and financial conditions.

Economic projections released by the FOMC suggest most members expected one more rate hike this year, unchanged from projections released in June. The median projections are for the fed funds rate to fall to 5.1pc next year, suggesting two rate cuts next year, compared with a prior forecast of 4.6pc for 2024. The median projection is for unemployment to rise to 4.1pc by the end of next year, compared with a prior forecast of 4.5pc.

The Fed has been engaged in its most aggressive course of monetary tightening since the 1980s as it seeks to constrain demand and hiring to bring inflation down to its 2pc target while avoiding a recession. Higher borrowing costs weigh on demand for big-ticket items such as automobiles, houses, and machinery to expand businesses.