The Federal Reserve said in a statement on Wednesday that it will pausing its extended campaign against inflation, leaving interest rates unchanged and giving borrowers a break after 11 increases since March 2022. They indicated, however, that one more interest rate hike is expected by year’s end.  Fed Chair Jerome Powell told reporters in a press conference: “We’re prepared to raise rates further, if appropriate.”

The Fed statement said: “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. Inflation remains elevated.” The Fed said it will hold the federal funds rate in a range of 5.25% to 5.5%, the same level as it announced at its last meeting in July. The current U.S. annual inflation rate of 3.7% recorded in August is higher than the Fed’s goal of 2%, but it is much lower than the 8.3% recorded in August 2022.

Even though the Fed isn’t boosting rates, borrowing costs are at their highest levels in 22 years. The central bank is seeking to lessen demand for purchases like homes and cars.  According to projections, the Fed will raise interest rates to a median of 5.6% by the end of this year and said two rate cuts are likely in 2024, half of the number of cuts projected in June. The Fed statement said: “In determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time, the committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”

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