US Fed keeps interest rate unchanged but cautions on elevated inflation

US Federal Reserve in its September policy meeting left the key interest rate unchanged at 5.25-5.50 per cent but cautioned it may go for additional tightening of monetary policy

Washington: The US Federal Reserve in its September policy meeting left the key interest rate unchanged at 5.25-5.50 per cent but cautioned it may go for additional tightening of monetary policy if need be.

The US central bank had hiked the interest rate on 12 occasions, necessitated in the fight against soaring inflation. Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.
‘Inflation remains elevated,’ US Fed Chair Jereme Powell cautioned.

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The US central bank in its July meeting too raised its benchmark interest rate by 25 basis points, the highest in the past 22 years at 5.25-5.5 per cent to tame inflation and bring it back to its 2 per cent target. In August, inflation in the US was at 3.7 per cent.

“Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have slowed in recent months but remain strong, and the unemployment rate has remained low,” Powell said. ‘The U.S. banking system is sound and resilient.

Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain,” Powell said, the the committee remains highly attentive to inflation risks.

It reiterated its aim achieve inflation at the rate of 2 percent over the longer run. “The Committee is strongly committed to returning inflation to its 2 percent objective.”