US Federal Reserve Pauses Rate Hikes, But Signals Potential Increases Ahead

US Federal Reserve Pauses Rate Hikes, But Signals Potential Increases Ahead

The US Federal Reserve has decided to pause its series of interest rate increases after raising rates for 10 consecutive times. However, they have indicated that if the economy and inflation don't cool down, they may raise rates again next month.

The Fed believes that borrowing costs may need to go up by as much as half a percentage point by the end of this year. According to their latest projections, about half of the officials expect rates to increase by another 0.5% beyond the current range of 5% to 5.25%, while a few officials believe rates should go even higher. The Fed now predicts that the highest point for the interest rate this year will be 5.6%, higher than their previous estimate of 5.1% in March. None of the officials anticipate a rate cut this year. They expect rates to decrease to 4.6% in 2024, compared to the previous projection of 4.3% in March.

In terms of economic data, the Fed expects core inflation to reach 3.9% this year, higher than the March projection of 3.6%. They anticipate the unemployment rate to rise to 4.1%, lower than the previous projection of 4.5%, and the GDP to grow by 1% in 2023, compared to the previous projection of 0.4%.

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