The decision came less than two months after the central bank's 0.5 percentage point cut in September. That was the first interest rate cut in four years as policy makers believed the inflation rate was about to hit the 2% target.

The Fed began its tightening monetary policy in March 2022, raising interest rates to 5.25% amid the highest price pressure in four decades.

The Fed's rate hikes have helped reduce annual inflation in the US from a record 9.1% in June 2022 to the current 2.5%. However, high interest rates make it more expensive for businesses and individuals to borrow money.

Economists and policy makers recommended that interest rates be kept high enough to curb inflation without derailing the economy.