The Federal Reserve held its benchmark interest rate steady on Wednesday, despite authorities signaling support for tighter monetary policy later this year and fewer rate cuts in the coming year.
The Federal Open Market Committee opted against a rate hike after its two-day meeting and voted unanimously to maintain the federal funds rate at 5.25% to 5.5%. This aligned with the U.S. central bank's strategy to proceed cautiously in the latter stages of its battle against inflation.
Since March 2022, the Fed has undertaken one of the most aggressive campaigns to curb consumer and business demand in decades, in a battle against price pressures that have proven much more persistent than expected.
In a statement, the committee stated it remains "very attentive to inflation risks," noting that economic activity has been expanding at a "solid pace" and that job gains, though slower, have been "strong."
The Fed also released on Wednesday a new set of individual economic projections from its officials, which foresaw stronger growth this year and a more benign inflation outlook compared to previous estimates released in June.
These projections, known as the dot plot, also signaled support for the funds rate to peak between 5.5% and 5.75% - translating into another quarter-point hike later this year - while forecasting fewer rate cuts in 2024 and 2025.
However, it is far from guaranteed that the Fed will proceed with further tightening. Authorities are increasingly focused on the risks facing the world's largest economy, while remaining vigilant to the threat of entrenched high inflation.
Officials are also aware that the impact of months of higher interest rates may only be becoming evident now, as evidenced by the cooling U.S. labor market. New growth challenges have also emerged, including the resumption of student loan payments, an unresolved strike by auto workers, and an impending government shutdown.
Policymakers are balancing these concerns with data showing that demand in many sectors remains robust, fueling strong consumer spending and potentially complicating the struggle to bring inflation back to the central bank's long-standing 2% target.