US holds interest rates steady but signals cuts ahead

Forecasts from the Federal Reserve show officials still expect cuts by the end of the year.
US holds interest rates steady but signals cuts ahead
a woman in business attire reviewing/signing documents at deskGetty Images

The US central bank has left its key interest rate unchanged again, while it looks for more evidence that inflation is coming under control.

The decision kept the target range for the Federal Reserve’s influential rate in the range of 5.25%-5.5%, where it has stood since July.

The Fed is debating whether higher borrowing costs have done enough to ease the pressures pushing up prices.

Officials said they still expected to cut rates by the end of the year.

Borrowing costs in the US, like the UK, are sharply higher than they were two years ago, when central bankers started pushing up rates in response to soaring prices.

Higher interest rates in theory work to cool inflation by make borrowing more expensive, slowing the economy and easing the pressures pushing up prices.

But if left in place for too long, they risk triggering a harsh economic slowdown.

The inflation rate, which tracks the pace of price increases, has slowed since peaks seen two years ago, falling to 3.2% in the US last month and sparking debate about when the Fed should start reversing course.

The Fed wants to see inflation return to 2%, but government figures last week showed prices in many areas were still rising faster than expected.

For now, the economy in the US has held up surprisingly well, despite the higher interest rates, relieving pressure on the Fed to act.

Forecasts released after the meeting showed that officials expect the economy to grow 2.1% this year, a significantly more rosy outlook than they had in December.

Source: bbc.co.uk

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