The <a href="https://www.thenationalnews.com/tags/federal-reserve/" target="_blank">Federal Reserve</a> on Wednesday paused increasing US <a href="https://www.thenationalnews.com/business/economy/2023/06/06/higher-interest-rates-to-slow-global-growth-in-2023-world-bank-says/" target="_blank">interest rates</a> to assess its tightening cycle on the economy, but signalled that it would resume raising rates again later this year. “In light of how far we've come and tightening policy, the uncertain lens with which monetary policy affects the economy and potential headwinds from credit tightening, today we decided to leave our policy interest rate unchanged,” Fed Chairman Jerome Powell said. Wednesday's decision broke a streak of 10 consecutive interest rate increases since March 2022 in a historic bid to tamp down on rising prices in the US. The Fed has raised rates to the target range of 5 per cent and 5.25 per cent since they hit a near-zero level last year. Mr Powell said the Fed has seen the effects of its aggressive rates on housing and investment, stressing it will take time for its full effects to be realised on inflation. Fed officials had given themselves room for a rate pause this month with inflation decelerating and faced with the fallout of three <a href="https://www.thenationalnews.com/business/banking/2023/05/16/greg-becker-svb-collapse/" target="_blank">regional banks</a>, with some policymakers arguing they need to step back to assess the bank failures' affect on the US economy. Hopes that interest rates would be held relatively steady throughout the rest of the year were dashed, however. Fed officials now project their key federal funds rate will close the year at 5.6 per cent – up from March's projection of 5.1 per cent, according to the committee's latest economic projections. “Looking ahead, nearly all committee participants viewed it is likely that some further rate increases will be appropriate this year to bring inflation down to 2 per cent over time,” Mr Powell said. The central bank projects its federal funds rate will climb down to 4.6 per cent by end of 2024 and 3.4 per cent by end of 2025. “I hasten to add as always, that these projections are not a committee decision or plan. If the economy does not evolve as projected path for policy we will adjust as appropriate,” he said. Mr Powell and his colleagues have sought to achieve a so-called soft landing by slowing spending without steering the economy into a recession. "We want to do that with the minimum damage to the economy, but we have to get inflation at 2 per cent," Mr Powell said. "We just don't see that yet. So hence you see today's policy decision." And while consumer confidence has dipped and the economy grew at a modest 1.1 per cent pace in the first quarter, a resilient labour market will probably push any chances of a recession until next year. The Fed now projects that real GDP growth in the US at 1 per cent this year, up from their March projection of 0.4 per cent. The labour market has been a particular headache for the Fed, which has insisted that a softening labour market, in the form of layoffs, is needed to help drive down inflation. <a href="https://www.thenationalnews.com/business/economy/2023/06/02/us-jobs-report-may-2023/" target="_blank">Employers added 339,000 jobs</a> last month while the unemployment rate ticked up to 3.7 per cent, well below the Fed's end-of-season forecast at 4.5 per cent. Mr Powell said last month it was possible to see a cooling in labour market conditions without driving up unemployment. The Fed expects unemployment to climb to 4.1 per cent by year's end, down from its previous 4.5 per cent forecast. Meanwhile, the central bank's forecast for its key inflation measure was projected to fall to 3.2 per cent, down from its March projection of 3.3 per cent. A separate report from Institute of International Finance published on Monday forecasts the US economy to grow by 1 per cent this year, with inflation dropping to 3.1 per cent, which the trade group says is a “positive outlook for capital flows to emerging market”.