US holds interest rates steady in first since 2022

The US central bank has announced it will hold interest rates steady - the first time it has opted against a rise in more than a year.

The Federal Reserve kept the target for its benchmark rate at 5%-5.25% saying it wanted time to assess the impact of rate hikes so far.

The bank has already raised rates 10 times since March 2022 as it battles to bring inflation under control.

Bank forecasts show most officials expect rates to rise further.

That would follow a path carved out by central banks in countries such as Australia and Canada, which recently announced rate hikes following a break, citing stubborn inflation pressures.

"A pause is not an end," said Diane Swonk, chief economist at KPMG in the US. "They don't want to let their guards down yet with regard to inflation."

Inflation in the US has already cooled considerably since last year, when the war in Ukraine prompted a spike in food and energy costs.

Consumer prices rose 4% in the 12 months to May, climbing just 0.1% from a month earlier, the Labor Department reported on Tuesday.

But that remains higher than the 2% rate the bank considers healthy. Prices for many items beyond food and energy continue to rise steadily.

The Fed has lifted its benchmark rate from near zero to more than 5% in less than 18 months - the highest level since 2007 - to try to rein in the increases - a historic shift after more than a decade of unusually low rates.

Federal Reserve Chairman Jerome Powell has said he wants to give time for the economy to adjust to the change, as it ripples out to the public in the form of higher costs for mortgages, business loans, credit cards and other borrowing.

In theory, higher costs should reduce demand for borrowing for homes, business expansions and other activity, eventually cooling the economy and easing pressures pushing up prices.