US Fed keeps rates steady

WASHINGTON, Sept 21 (Reuters): The US Federal Reserve held interest rates steady on Wednesday but stiffened a hawkish monetary policy stance that its officials increasingly believe can succeed in lowering inflation without wrecking the economy or leading to large job losses.
The Fed's benchmark overnight interest rate may still be lifted one more time this year to a peak 5.50 per cent-5.75 per cent range, according to updated quarterly projections released by the US central bank, and rates kept significantly tighter through 2024 than previously expected.
"People hate inflation. Hate it," Fed Chair Jerome Powell said in a press conference after the end of a two-day policy meeting at which central bank officials held the benchmark overnight interest rate in the current 5.25 per cent-5.50 per cent range, but sketched a stricter policy path moving forward in an inflation fight they now see lasting into 2026.
But a "solid" economy with still "strong" job growth, Powell said, will allow the central bank to keep that additional pressure on financial conditions through 2025 with much less of a cost to the economy and labor market than in previous U.S. inflation battles.
Indeed, monetary policy is expected to remain slightly restrictive into 2026 while the economy continues to largely grow at its estimated trend level of around 1.8 per cent.
Even as inflation declines for the rest of 2023, the Fed anticipates only modest initial reductions to its policy rate. That means the expected half percentage point of rate cuts in 2024 would have the net effect of raising the "real" rate.