In its latest development, the US Federal Reserve has opted to leave interest rates unchanged, persisting with its hawkish stance. Federal Reserve Chair Jerome Powell, in a statement, hinted at the central bank's approach nearing the conclusion of its interest rate hike cycle. Meanwhile, other policymakers conveyed a more forceful message, asserting that interest rates would need to remain elevated for an extended period, given the renewed vigor in the economy.

The US central bank had earlier raised the target range for the US federal funds rate in July, reaching a range of 5.25% to 5.5%, marking a 22-year high, after being at near-zero levels in March 2022. Notably, this marks the third consecutive Federal Open Market Committee (FOMC) meeting where the rate has remained unchanged.

Nonetheless, recent data reportedly underscores the resilience of the US economy in the face of monetary tightening. Consumer spending continues to exhibit strength, and the labor market has remained stable, despite indications of a slowdown in job growth. The unemployment rate has held steady at 3.8% throughout the year, with projections suggesting a modest increase to 4.1% by year-end.

In its latest statement on Wednesday, the FOMC noted, "Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have moderated in recent months but remain robust, and the unemployment rate remains low. Inflation remains elevated... Tighter credit conditions for households and businesses are likely to exert pressure on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly vigilant regarding inflation risks."

Furthermore, the policy committee expressed its commitment to assessing additional data and considering further policy adjustments that may be necessary to gradually bring inflation back to its 2% target over time.

Meanwhile, Jerome Powell emphasized, "We have made significant strides, but the full impact of our tightening measures is yet to be fully realized."

He went on to state, "We are prepared to raise rates further when deemed appropriate, and we plan to maintain a restrictive policy stance until we have confidence in a sustainable decline in inflation."

During the post-monetary press briefing, Powell conveyed that stronger economic activity necessitates continued vigilance with respect to interest rates. He clarified that the projected rate hikes in 2024 are driven more by the Fed's optimism regarding economic growth than by growing concerns about stubborn inflation.

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