The <a href="https://www.thenationalnews.com/tags/federal-reserve" target="_blank">Federal Reserve</a> on Wednesday left US <a href="https://www.thenationalnews.com/tags/interest-rates/" target="_blank">interest rates</a> unchanged following recent data that points to a cooling economy. Following Wednesday's decision, the federal funds rate remains between 5.25 per cent and 5.50 per cent. It is the second time the Fed has paused rates since March 2022. “We've covered a lot of ground,” Fed Chairman Jerome Powell told reporters. “Looking ahead, we're in a position to proceed carefully in determining the extent of additional policy firming that may be appropriate.” Ahead of the decision, markets were optimistic that the Fed was done with raising rates for this year. but the central bank has left the door open for one more. According to its Summary of Economic Projections released alongside the rates decision, the Fed projects the federal funds rate will reach 5.6 per cent by year's end. The question that the Fed currently faces is not for when it should cut interest rates, but instead finding a level that is sufficiently restrictive enough. Economic data has been mixed in recent months, but recent trends generally show signs that the economy is moving in the direction the Fed wants it to. The labour market appears to be softening at a steady clip while unemployment remains historically low. And while inflation ticked up 0.6 per cent last month, underlying measures showed signs of cooling. Wage growth, however, still remains strong. “We want to see convincing evidence … that we have reached the appropriate level,” Mr Powell said. “We need to see more progress before we'll be willing to reach that conclusion." By raising its interest rates to the target 5.25 per cent to 5.50 per cent range, the central bank has sought to accomplish a soft landing by slowing down the economy without pushing it into a recession. The hawkish Fed chairman has also cautioned markets that the central bank is prepared to raise rates further if data merits it. He and his colleagues have repeatedly indicated they will maintain a restrictive monetary stance, keeping rates high for some time. The central bank now anticipates rates will fall to 5.1 per cent by the end of 2024, up from its June estimation of 4.6 per cent. “We intend to hold policy and restrictive level until we're confident that inflation is moving down sustainability,” Mr Powell said
