‘Less hawkish’ Federal Reserve leaves rates unchanged

The news: The Federal Reserve held US interest rates steady on Wednesday but left the door open to a further increase in borrowing costs.

The numbers: After a two-day meeting, the US central bank officials unanimously agreed to leave the benchmark interest rate in the 5.25%-5.50% range, where it has been since July, prompting gains for stocks while the US dollar pared gains against a basket of currencies.

The context: The Fed’s policy statement acknowledged the US economy's surprising strength but also nodded to the tighter financial conditions faced by businesses and households. The statement itself has become increasingly spare as officials have become less certain about their next move. It balances a sluggish but continuing fall in inflation against a sense the US economy is likely to slow in coming months, and concern that pushing too much harder with rate increases could cause it to slow more than needed.

Traders of short-term US interest rates added to bets the Fed is done raising its policy rate and will start cutting rates by June of next year. However, data pointing to a stronger-than-expected economy and labour market have kept the prospect of another hike on the table.