In an effort to address soaring inflation levels that recently approached near-record highs, the US Federal Reserve has opted to keep its key interest rate steady at the current 22-year high. The Federal Reserve’s target rate will remain in the range of 5.25% to 5.5%.
The central bank has been incrementally increasing borrowing costs as part of its strategy to cool down the economy and curb inflation, which measures the rate at which prices rise. This decision comes on the heels of recent economic data revealing that the US economy has outperformed expectations.
One approach to tackling inflation is to raise interest rates. The rationale behind this strategy is that by elevating interest rates and making borrowing more expensive, consumers are incentivized to spend less. This reduced spending, in turn, is expected to result in slower price increases.
The Federal Reserve had faced criticism from some quarters, with concerns that maintaining higher interest rates could potentially push the US economy into a recession. However, the US economy posted robust growth of 4.9% from July to September, surpassing previous quarter figures. This growth was buoyed by a tight labor market and increased consumer expenditure.
In its statement issued on Wednesday, the Federal Reserve revealed that the decision to retain current interest rates was unanimous among its members. The central bank also underscored its readiness to adjust its policy “as appropriate” should unforeseen risks emerge.