WASHINGTON (Reuters) – The US Federal Reserve (Fed) on Wednesday, as expected, maintained its target for fed funds rates at 5.25%-5.50%, the highest level in 16 years, citing still significant inflation.

This decision was taken unanimously, the American central bank said in a statement at the end of its two-day monetary policy meeting.

Economic projections published with the monetary policy decision show that members of the board of governors of the American central bank expect a further increase of 25 basis points by the end of 2023.

Fed officials now forecast that the PCE consumer price index will reach 3.3% year-over-year growth at the end of 2023, up from a forecast of 3.2% in June, and that it will fall to 2. 5% at the end of 2024, compared to 2.5% according to the prior estimate.

Inflation would reach 2.2% by the end of 2025, before reaching its target of 2.0% in 2026.

Fed officials also forecast a cut in the policy rate to 3.9% by the end of 2025, from 3.4% previously, and to 2.9% by the end of 2026.

Overall, the projections suggest growing confidence in the scenario of a soft landing for the U.S. economy, in which inflation slows without a sharp drop in growth or a significant rebound in unemployment.

Forecasts call for U.S. gross domestic product (GDP) growth of 2.1% this year, up from a forecast of 1.0% in June, and growth of 1.5% next year. The unemployment rate, which is currently at 3.8%, is expected to peak at 4.1% in 2024 and remain at this level in 2025, compared to a rate of 4.5% expected in June.

Fed Chairman Jerome Powell is expected to comment on the FOMC’s decisions and forecasts during a news conference scheduled for 6:30 p.m. GMT.

(Reporting Howard Schneider; Corentin Chappron, edited by Jean Terzian)

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