The U.S. central bank, the Federal Reserve (Fed), kept the benchmark interest rate unchanged as expected, while indicating the possibility of one more rate hike within the year according to the dot plot.
On the 20th (local time), the Fed announced through the policy statement released after the September Federal Open Market Committee (FOMC) regular meeting that the federal funds rate will be maintained at the existing 5.25?5.5% range.
The FOMC stated, "Recent indicators suggest that economic activity is expanding at a solid pace," adding, "Job gains have slowed in recent months but remain strong. Inflation is still rising." It also confirmed, "We will continue to assess incoming information and the effects of monetary policy," and "When determining the appropriate extent of additional policy firming to return inflation to the 2% target, we will consider the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments." The content of the policy statement shows little change from before.
The newly released dot plot maintained the median interest rate forecast for the end of this year at 5.6%. However, the median rate forecast for 2024 was raised from 4.6% to 5.1%, and the median rate forecast for the end of 2025 was increased from 3.4% to 3.9%. This suggests that even after the rate hike cycle ends, high interest rates will persist for an extended period. Inflation is expected to be 3.3% this year, with growth projected at 2.1%.
The market is now awaiting the press conference of Fed Chair Jerome Powell. Powell is expected to express at the press conference, which will be held at 2:30 p.m. Eastern Time, that additional rate hikes are possible at any time if necessary.
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