US Federal Reserve Board Chairman Jerome Powell delivers remarks after the Fed refrained from raising interest rates following its two-day conference at the Federal Reserve in Washington, DC, USA, 01 November 2023. (Roma) EFE/EPA/JIM LO SCALZO

Fed keeps interest rates on hold but leaves door open for hikes

Washington, Nov 1 (EFE). – The United States Federal Reserve (Fed) decided on Wednesday to maintain the pause in interest rate increases, the second after eleven increases since March 2022, although it did not rule out future hikes.

The US central bank, decided to keep interest rates at the current range of 5.25% and 5.5%, its highest level since 2001.

“The committee will continue to assess additional information and its implications for monetary policy. In determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time,” it added in the statement released after the meeting.

For now, the extent of the effects of rate hikes “remain uncertain,” the Fed said, stressing that the committee “would be prepared to adjust the stance of monetary policy as appropriate if risks emerge.”

Therefore, increases may be possible at the Fed’s December 12-13 meeting.

According to the statement, the Federal Open Market Committee (FOMC) will continue to evaluate economic data and monitor the effects of monetary policy in the coming weeks.

The committee spoke minutes before Fed President Jerome Powell´s press conference to explain the decision.

Powell said in his speech that “a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal.”

“The process of getting inflation sustainably down to 2% has a long way to go,” he added.

Recent economic data “indicate(s) that economic activity expanded at a strong pace in the third quarter. Job gains have moderated since the beginning of the year but remain strong, and the unemployment rate has remained low. Inflation remains elevated,” said the Fed.

“Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation,” it added.

Until June, the members of the FOMC voted to raise rates at all of their meetings, after a pause in June, they raised them again in July, and in September, and then decided to pause again.

The halt comes in a complex inflationary context. After almost a year of declines from the peak of 9.1% reached in June 2022, prices registered an increase of five tenths in August, to 3.7%, the second consecutive increase, and remained at the same figure in September.

However, the annual rate of core inflation, which measures the rise in prices without taking into account energy or food – one of the indicators on which the Fed focuses – fell by two tenths in September, confirming its downward trend.

The United States also registered an unexpected rebound in its gross domestic product, advancing 1.2% in the third quarter, with an annual growth rate of 4.9%, according to data published last week by the Bureau of Economic Statistics (BEA).

Regarding the labor market, job creation in the month of September remained robust, with 336,000 net new jobs, and the rate remained stable at 3.8%. EFE