The Federal Reserve has left US interest rates unchanged again

The US Federal Reserve has kept interest rates unchanged from last month. Chairman Jerome Powell still thinks inflation is high, but the U.S. central bank is now first examining what effect earlier interest rate hikes will have.

The central bank began raising interest rates last year to curb inflation, shortly after the war in Ukraine broke out. By making debt more expensive, central banks hope to curb demand in the economy, which should curb inflation. US interest rates are now between 5.25 and 5.50 percent, the highest level since 2001.

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Central bank policymakers expect a series of interest rate hikes over the past year and a half to hit the economy and the labor market as well. This is due not only to more limited borrowing options, but also to tighter financial conditions for companies and households. According to them, it remains uncertain how strong this effect of interest rate hikes will be.

For now, higher interest rates don’t seem to be hitting the US economy hard. For example, GDP rose faster in the third quarter than in the previous three months, mainly because consumers spent more. On Wednesday, the U.S. Bureau of Labor Statistics released job vacancy statistics, indicating a tight labor market.

At least one increment

The central bank has now left interest rates unchanged three times this year. After the previous interest rate decision, in September, most policymakers indicated they expected at least one more increase in 2023. An additional argument may be the strong growth of the US economy. But Powell also said at the time that inflation remained close to the desired 2 percent, allowing the central bank to be more cautious about making loans more expensive.