Fed holds interest rates at a 23-year high

Officials at the US central bank have left interest rates at a 23-year high, while offering little certainty about the path ahead for borrowing costs.

The decision from the Federal Reserve again kept the target range for its benchmark rate, which helps set borrowing costs for mortgages, credit cards and other loans, at 5.25%-5.5%.

That is sharply higher than two years ago, when the Fed started raising rates to fight inflation.

Investors expect rate cuts this year.

Supporters of rate cuts argue that the soaring price increases that pushed the central bank to start raising rates in 2022 have slowed.

The inflation rate, which tracks the pace of price rises, was 3.4% in the US in December - and is even lower by some measures, starting to approach the 2% rate the bank considers healthy.

The Fed has not raised interest rates since July, with this month's meeting marking the fourth without change.

But exactly when the bank will start to reverse course is being closely watched, especially as a slew of central banks in other countries, including the Bank of England which meets on Thursday, face similar decisions.

The Fed's statement on Wednesday no longer floated the possibility higher rates.

But it also warned that officials did not "expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent".

Higher interest rates cool inflation by making borrowing more expensive, discouraging people and businesses from taking on debt.

As activity such as home purchasing and business expansion declines, the economy slows and the pressures pushing up prices ease.

Some industries have been severely hit from the change in rates, such as housing, which saw saw the fewest sales of existing homes since 1995 last year.

But broadly speaking, the economy has remained unexpectedly resilient, relieving pressure on the Fed to act.

Growth in the final months of the year proceeded at a 3.3% annual rate, while the unemployment rate in December was 3.7%, near historic lows.

While fears of recession have receded, analysts say the Fed will not want to leave that weight on the economy indefinitely.

In December, forecasts showed that most members of the Fed's rate-setting committee expected rates to stand 0.75 percentage points lower at the end of this year.