US interest rates have been held for the fifth time in a row by the Federal Reserve.
The decision, which was broadly expected, means rates remain between 3.5% and 3.75%.
Higher interest rates make borrowing more expensive for people wanting to secure loans, mortgages and credit cards, but can lead to better returns on savings.
Policymakers decided to keep rates at the level they have been since December last year after inflation, the rate at which prices rise, slowed last month, but concerns remain that the dip could prove short-lived.
Despite inflation falling to 3.5% in the year to June, the rate prices are rising at remains above the Fed’s 2% target. A lower rate of inflation does not mean prices are falling, but that they are rising at a slower rate.
There is also growing uncertainty over the impact of the ongoing conflict in the Middle East on global oil prices and subsequently general consumer prices in the coming months.
The Fed acknowledged that inflation remained “elevated” which it said was in part due to energy price increases.
But policymakers at the US central bank voted 9-3 in favour of keeping interest rates on hold. The three who voted against were pushing instead for a small hike, with speculation ahead of the decision that an increase in the rate was on the cards due to renewed hostilities between the US and Iran pushing up global oil prices.
“Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East. Productivity growth and capital investment are strong,” the Fed said in a statement following the decision.
Richard Flynn, managing director at Charles Schwab UK, said the “biggest smoke signal” for the US central bank was the energy market, with the ongoing conflict in Iran likely to influence future rate decisions.
“We expect the Fed to hold through year end even as futures markets flirt with pricing in a hike,” he said.
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