The Federal Reserve has maintained interest rates at their highest level in 22 years and hinted that interest rates will remain high for a considerable period of next year to ensure that inflation continues to decline.
Federal Reserve Chairman Jerome Powell said at a press conference on Wednesday that "the Federal Open Market Committee (FOMC) is acting cautiously," avoiding questions about whether the central bank is inclined to raise interest rates at the December policy meeting.
At the September meeting of Federal Reserve officials, most expected another rate hike this year, but in recent weeks, some officials' speeches did not seem to be in a hurry to raise rates again unless hotter than expected economic data forced them to do so. This is different from the situation earlier this year, when they were more concerned about too little tightening.
Officials have been striving to balance the two risks. They do not want to raise interest rates excessively to avoid causing unnecessary severe recession. They also do not want inflation to accelerate or stabilize far above the 2% target. Powell said, "We are entering a state where risks are closer to equilibrium
The Federal Reserve's interest rate decision on Wednesday was a delicate moment for the financial market, because since the Federal Reserve officials last raised interest rates in July, the yield of 10-year US treasury bond bonds has risen rapidly by nearly one percentage point. The Federal Reserve raised the benchmark federal funds rate to between 5.25% and 5.5% at that time.
Now, Federal Reserve officials have held two consecutive meetings without action, marking the longest pause in interest rate hikes since March 2022, when interest rates were raised from near zero levels. Since March last year, they have raised interest rates at the fastest pace in 40 years to cope with high inflation.