The US Federal Reserve kept its key policy rate unchanged at a 22-year-high on Wednesday – the second time it has hit the pause button this year – while forecasting an additional rate hike before the end of the year to bring down inflation.
The Fed's decision to keep its key lending rate between 5.25 per cent and 5.50 per cent gives policymakers time to "assess additional information and its implications for monetary policy", the central bank said in a statement.
After 11 interest rate hikes since March last year, inflation has fallen sharply but remains stubbornly above the Fed's long-run target of 2 percent per year - keeping pressure on officials to consider further policy action.
UAE holds rates steady
Shortly after the Fed's announcement, the UAE Central Bank said it's keeping its interest rate unchanged.
“The Central Bank of the UAE (CBUAE) has decided to maintain the base rate applicable to the overnight deposit facility (ODF) without change at 5.40 per cent,” it said in a statement.
“The CBUAE also has decided to maintain the rate applicable to borrowing short-term liquidity from the CBUAE through all standing credit facilities at 50 basis points above the base rate.”
Fed policymakers see 5.1% policy rate at end of 2024
US central bankers expect that after a final interest-rate hike this year, to 5.6 per cent, they will end next year with short-term borrowing costs at 5.1 per cent, reflecting fewer interest rates cuts than they anticipated three months ago.
That's according to the median of 19 forecasts included in the latest quarterly summary of Federal Reserve policymaker projections published on Wednesday, alongside the Fed's decision to leave its policy rate unchanged.
The dialed back pace of anticipated policy easing next year goes hand in hand with what policymakers expect to be mixed progress toward the Fed's 2 per cent inflation goal.
Fed officials now see the personal consumption expenditures price index at 3.3 per cent at year end, versus June's forecast of 3.2 per cent, falling to 2.5 per cent by the end of next year, compared with 2.5 per cent seen in June.
They envision inflation reaching 2.2 per cent by the end of 2025, before finally attaining their 2 per cent goal in 2026.
Fed officials expect further reductions in the policy rate as well, to 3.9 per cent by the end of 2025 - above the 3.4 per cent they projected in June - and to 2.9 per cent by the end of 2026.
Overall the updated projections suggest mounting confidence in a "soft landing" scenario for the economy, in which inflation cools without a steep drop-off in economic growth or a sharp rise in the unemployment rate.
Policymakers see US GDP growing 2.1 per cent this year, a notable upgrade from the 1 per cent growth projected in June, and expanding by 1.5 per cent next year. Meanwhile the unemployment rate - which is currently at 3.8 per cent - is seen peaking at 4.1 per cent in 2024 - and remaining there for 2025 - versus the 4.5 per cent high-water mark seen in June.
With inputs from agencies