The U.S. Federal Reserve has signalled that its current cycle of interest rate hikes is coming to an end.
The central bank hinted that it now plans to pause its monetary tightening regime and assess its impact on the economy even as it approved a 10th interest rate increase, bringing the federal funds rate to a target range of 5% to 5.25%, the highest level in 16 years.
In a unanimous decision that was widely expected by economists and traders, the Federal Open Market Committee raised its benchmark borrowing rate by 25-basis points or a quarter of a percentage point.
At a news conference immediately following the interest rate increase, Federal Reserve Chair Jerome Powell indicated that the U.S. central bank is now likely to pause any further rate increases while it reviews and considers economic data.
The post-meeting statement issued by the Fed omitted a sentence present in the previous statement saying that “the Committee anticipates that some additional policy firming may be appropriate” to achieve a 2% inflation goal.
The latest interest rate hike comes amid signs that the U.S. economy is slowing. At the same time, inflation in the U.S. currently sits at 5%, well above the 2% target that the Fed considers optimum.
“Inflation pressures continue to run high and the process of getting inflation back down to 2% has a long way to go,” Powell said at his news conference.
Several Fed officials have said in recent weeks that interest rates may need to stay at current levels for an extended period to bring inflation back down to 2%.
However, traders are anticipating that slower economic growth and a potential recession will force the U.S. central bank to cut interest rates by year’s end.
