To tame the inflation and keep the growth rate buoyant, the US Federal Reserve kept its key interest rate unchanged Wednesday after having raised it 10 straight times to combat high inflation. But in a surprise move, the Fed signaled that it may raise rates twice more this year, beginning as soon as next month.
The Fed's move to leave its benchmark rate at about 5.1 percent, its highest level in 16 years, suggests that it believes the much higher borrowing rates it's engineered to have made some progress in taming inflation. But top Fed officials want to take time to more fully assess how their rate hikes have affected inflation and the economy.
The central bank's policymakers envision raising their key rate by an additional half point this year, to about 5.6 percent, according to economic forecasts they issued Wednesday.
The economic projections revealed a more hawkish Fed than many analysts had expected. Twelve of the 18 policymakers forecast at least two more quarter-point rate increases. Four supported a quarter-point increase. Only two envisioned keeping rates unchanged. The policymakers also predicted that their benchmark rate will stay higher for longer than they did three months ago.
"We understand the hardship that high inflation is causing, and we remain strongly committed to bringing inflation back down to our 2 percent goal," Fed Chair Jerome Powell said at a news conference. "The process of getting inflation down is going to be a gradual one -- it's going to take some time."
Still, Powell stopped short of saying the Fed's policymakers have committed to resuming their rate hikes when they next meet in late July. One reason why the officials may be predicting additional rate hikes is that they foresee a modestly healthier economy and more persistent inflation that might require higher rates to cool