However, the Fed has hinted that future increases in borrowing costs may be smaller to take into account the consequences of the “cumulative tightening of monetary policy” it has pursued thus far.
The US central bank is trying to curb inflation, the highest in 40 years, amid criticism that it was slow to respond to price hikes last year. These strong interest rate hikes have unsettled financial markets, as investors fear that the Fed’s moves will trigger a recession.
And the Fed’s decision comes less than a week before the midterm elections in the United States, where Republicans have made high inflation a major issue and tried to blame President Joe Biden and his party in Congress. Last week, two Democratic senators urged Powell not to cause unnecessary pain by raising interest rates dramatically, according to Bloomberg.
Markets hope that the US central bank will start reducing the pace of interest rate increases, starting from next December, in order to prevent the US economy from falling into a recession.
The US economy grew by 2.6 percent in the third quarter of this year, on an annual basis, ending two quarters of deflation.
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