Encouraged by the progress against inflation, which has fallen more than halfway from its recent peak, the Federal Reserve has opted not to raise its benchmark interest rate—for now.

In a widely expected move, the central bank held the fed funds rate unchanged Wednesday. The Fed’s inaction leaves the benchmark rate steady at a range of 5% to 5.25%, still the highest level since 2007. Fed officials said they would closely watch data on inflation and the health of the economy, leaving the option open for another rate hike when the central bank’s policy committee meets in July.

Indeed, members of the bank's policy-setting committee expect to raise the rate an additional 50 basis points by the end of the year before beginning to reduce the rate in 2024, according to projections released Wednesday.

The pause in rate hikes means that the key interest rate influencing the costs of consumer loans like credit cards and mortgages, as well as yields on bank deposits, may have gotten as high as it will get for the time being. The Federal Open Market Committee (FOMC) has steadily ratcheted the rate up since March 2022, making credit more expensive for businesses and individuals. Rate hikes were designed to discourage borrowing and spending in an effort to rebalance supply and demand, hopefully subduing rapid inflation until it hits the 2% annual rate that the Fed targets. 

"Holding the target range steady at this meeting allows the Committee to assess additional information and its implications for monetary policy," the FOMC said in a statement. "In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments."

With key measures of inflation having fallen significantly from their recent peaks last year, Fed officials have grown more hesitant to raise rates the of the collateral damage it could have on the economy and the financial system. High borrowing costs have dampened consumer spending and the housing market, raised the threat of a recession, and exposed cracks in the banking system

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