The US Federal Reserve held interest rates steady on Wednesday but left the door open to a further increase in borrowing costs in a policy statement that acknowledged the US economy’s surprising strength but also nodded to the tighter financial conditions faced by businesses and households.
Traders of short-term US interest rates added to bets the Fed is done raising its policy rate and will start cutting rates by June of next year. The Fed’s latest statement noted that with job gains still “strong” and inflation still “elevated” the central bank continues to consider “the extent of additional policy firming that may be appropriate to return inflation to 2% over time”.
The statement issued on Wednesday said the Fed is still watching the developing impact of its past rate hikes as it mulls further action, cognisant of “the lags with which monetary policy affects economic activity and inflation, and economic and financial developments”.
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