The U.S. Federal Reserve on Wednesday left its benchmark interest rate unchanged at a 23-year high of 5.25-5.50 percent, citing economic growth, while also suggesting that an anticipated cycle of cutting borrowing costs is not likely to begin soon.
The Fed's fourth consecutive decision to maintain the target range for the federal funds rate as widely expected came as officials, economists and investors have turned their attention to when the U.S. central bank might embark on a cutting cycle.
The rate-setting Federal Open Market Committee said in a statement with marked changes from past phrasing that recent data suggest "economic activity has been expanding at a solid pace" and it will "carefully assess incoming data, the evolving outlook, and the balance of risks" in considering any future adjustments to the target range.
Departing from past language that suggested a willingness to keep raising rates until high prices had been brought under control, it noted that the committee regards rate-cutting as inappropriate "until it has gained greater confidence that inflation is moving sustainably toward 2 percent."
After its first policy meeting of this year, Fed Chair Jerome Powell said the Fed cannot yet declare victory in its long-running attempt to cool high inflation.
"We think we have a ways to go," Powell said at a press conference.
When asked about the possibility of a rate cut in March at the committee's next meeting, he said it was "probably not the most likely case."
Inflation has fallen significantly over the year, but it is still higher than the Fed's 2 percent target, while the job market remains resilient.
The Commerce Department's personal consumption expenditures price index, an important measure of inflation watched by the Fed, was up 2.6 percent in December from a year earlier. On a monthly level, the figure, released Friday, marked a 0.2 percent increase.
Earlier this week, the International Monetary Fund also revised upward its forecast for U.S. growth this year to 2.1 percent from the 1.5 percent it had estimated in October. An IMF economic outlook report showed that the United States has one of the most robust economies in the world.
Since March 2022, the U.S. central bank has repeatedly raised the target range for the benchmark rate from near zero in an attempt to tamp down inflation, while trying as best as it can to prevent the economy from falling into a recession.
The rate, which commercial banks charge each other for overnight loans, has not been changed since it was last raised in July.
Attention has now shifted to the potential timing of a pivot to rate cuts, rather than whether the Fed will go for a 12th hike in its tightening cycle.
At the previous meeting in mid-December, Fed policymakers projected they would make three rate cuts in 2024 as inflation steadily eased.
Economists and investors have factored in the possibility of the Fed commencing its rate-cut cycle in the first half of the year, with some betting on the chance of action as early as March.
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