The Federal Reserve maintains interest rates, but expects a further hike before the end of the year

Jerome Powell is still trying to achieve the soft landing of the economy. In his fight against inflation, the chairman of the US Federal Reserve has decided to take a breather. The monetary policy committee of the central bank has maintained at its meeting on Wednesday interest rates in the range of 5.25-5.50%, as expected. The cycle of rate hikes appears to be coming to an end (if it hasn't peaked already) and Powell had already said at last month's Jackson Hole symposium that the next steps would be taken "carefully."

The members of the monetary policy committee of the central bank have published on Wednesday their forecasts for the end of the year of evolution of the gross domestic product, the unemployment rate, inflation and, singularly, interest rates. Although these forecasts often deviate from reality and the rate forecast does not compromise their decisions, the median forecast points to a further rise of 0.25 points before the end of the year, to the range of 5.5%-5.75%, before lowering the price of money over the next two years. The central bank does not foresee a recession, but a period of low growth.

The president of the Federal Reserve will appear at a press conference at 14:30 p.m. in Washington (20:30 p.m. in mainland Spain) to give an account of the decisions taken. Along with the projections released today by committee members, Powell's words will guide the central bank's next steps. Analysts expect a tough message against inflation, but refer to the next data to see if it is necessary to give another twist to monetary policy.

"In determining the degree of further monetary policy tightening that may be appropriate to return inflation to 2% over time, the committee will take into account the cumulative tightening of monetary policy, the delays with which monetary policy affects economic activity and inflation, and economic and financial developments," Wednesday's statement said.

Inflation has fallen from the peak of 9.1% it reached in mid-2022, but after a year of containment, it has been rising for two months and is still at 3.7%, with the August figure well above the 2% price stability target. The latest rebound has been due to the rise in the price of gasoline. Core inflation, which removes energy and food for consumption at home from the basket, has continued to fall, but is still at 4.3%. The battle against inflation is not won.

The Fed's next two-day rate meetings are Oct. 31-Nov. 1 and Dec. 12-13. Before the first, the data on the evolution of the labour market and prices in September will be known, while for the second the employment and inflation figures for October and November will also be available. Much of the market expects another pause in November and that the committee puts on hold the decision on whether to raise rates further or not for December. The market only expects, at most, a rise of more than 0.25 points.

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