The US Federal Reserve on Wednesday stayed to its July stance by keeping the interest rates unchanged at 5.25 per cent - 5.50 per cent, while forecasting an additional 25 basis points (bps) rate hike before the end of the year.
Policymakers left the median projection for interest rates at the end of this year between 5.50% and 5.75%, with the possibility of another quarter percentage point hike by December.
In their July policy decision, Federal Open Market Committee (FOMC) members had voted unanimously to hike the overnight interest rate to a 22-year high to bring inflation down to the 2 per cent target.
The current decision to not change the lending rates gives policymakers time to "assess additional information and its implications for monetary policy," the US central bank said in a statement.
“The process of getting inflation sustainably down to 2 per cent has a long way to go," Chair Jerome Powell said at a post-policy press conference. “We’ve seen progress, and we welcome that, but we need to see more progress." Afterwards, he concluded by saying that it's appropriate to end the rate hikes.
However, Powell said he feels confident that the end of the rate-hiking cycle is near. ‘’We’re fairly close, we think, to where we need to get. We’re taking advantage of the fact that we moved quickly in the past," he added.
The officials now expect to cut interest rates only twice and not four times next year.
FOMC also provided updated forecasts of its members for indicators such as inflation and growth.
Fed policymakers project the US gross domestic product (GDP) to grow 2.1 per cent this year, up from 1 per cent growth projected in June. For next year, they see growth expanding by 1.5 per cent.
Meanwhile unemployment rate, which currently stands at 3.8 per cent, is seen reaching 4.1 per cent in 2024, and staying there for 2025.
Core inflation is expected to fall to 3.7 per cent by end of the year, better than 3.9 per cent predicted in June. Core inflation, under the Fed’s preferred measure, is now 4.2 per cent.
FOMC estimates US inflation to reach 2.2 per cent by the end of 2025, before finally attaining the 2% goal in 2026.