Fed Holds Rates Steady but Pencils in One More Hike This Year

livemint.com:

WASHINGTON—Federal Reserve officials voted to hold interest rates steady at a 22-year high but signaled they were prepared to raise rates once more this year to combat inflation. With economic activity stronger than anticipated, a majority of officials also expected they would need to maintain interest rates near their current level through next year, according to projections released Wednesday at the conclusion of their two-day policy meeting. Fed officials raised their benchmark federal-funds rate at their previous meeting in July to a range between 5.25% and 5.5%.

They began lifting rates from near zero in March 2022. Wednesday’s decision marks the second meeting this year that the Fed opted against raising rates. It also paused in June.

Because it can take a year or longer for rate increases to slow economic activity, Fed Chair Jerome Powell has said a slower pace of hikes would give officials more time to see how the economy is responding to them. Powell last month signaled he was reluctant to declare victory too soon in the Fed’s inflation fight. Recent progress slowing inflation is “only the beginning of what it will take to build confidence that inflation is moving down sustainably," he said during a widely anticipated address in Jackson Hole, Wyo.

And signs of stronger economic-than-anticipated economic activity “could put further progress on inflation at risk." The new economic projections showed 12 officials expect to raise rates once more this year, the same as they saw in June. The Fed meets again on Oct. 31-Nov.