US Federal Reserve Board Chairman Jerome Powell prepares to respond to questions from the news media during a press conference at the Federal Reserve in Washington, DC, USA, 20 September 2023. EFE/EPA/SHAWN THEW

The Fed doesn’t raise interest rates, but keeps them high

Washington, Sept 20 (EFE).- The United States Federal Reserve announced on Wednesday a pause in interest rate hikes, but did not indicate whether more increases will take place before the end of the year.

“The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals,” the US central bank said in a statement after deciding to keep interest rates in the current range of 5.25% and 5.5%, their highest level since 2001.

It is unclear whether the Fed will raise rates further at its last two meetings of the year, in late October and December.

The Fed said in its statement that the Federal Open Market Committee will continue to evaluate additional information and its implications for monetary policy.

This assessment, it added, will take into account a wide range of information, including labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

According to the Fed’s findings, the US banking system is “sound and resilient” and tighter credit conditions for households and businesses are likely to affect economic activity, hiring, and inflation.

“The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks,” the note said, stressing its determination to reach its targert of 2% inflation.

The members of the FOMC, the body responsible for deciding whether or not to raise interest rates, have voted to raise rates at every meeting since the rate hike began, except for last June, when they decided to pause. However, rates were raised again in July.

This new pause comes amid a complex context for inflation. After more than a year of declining inflation since its peak of 9.1% in June 2022, prices rose five-tenths of a percentage point in August to 3.7%, the second consecutive increase.

However, the annual rate of core inflation, which measures the rise in prices excluding energy and food and is one of the indicators on which the Fed focuses most of its decisions, fell by four tenths in August, confirming the downward trend.

As for unemployment, another key indicator analyzed by the Fed when deciding on possible rate hikes, job creation has slowed in recent months and in August only 187,000 net jobs were created (below the average of the last twelve months, 271,000).

Although the unemployment rate rose by three-tenths of a percentage point to 3.8%, the figure remains high in a context of weak growth for the US economy, which grew by 0.5% quarter-on-quarter in the second quarter, according to the latest official data. EFE