Are rates increasing further?
The Federal Reserve has announced that it has paused at its current interest rate following the conclusion of its latest policy meeting on Wednesday.
The decision was in line with market forecasts that the central bank would hit the brakes on its rate hikes. This is only the second time since March 2022 that the Fed declined to raise interest rates after opting to keep the rate unchanged last June.
“The committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run,” it said. “In support of these goals, the committee decided to maintain the target range for the federal funds rate at 5.25-5.5%. The committee will continue to assess additional information and its implications for monetary policy. In determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time, the committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
The Fed’s benchmark interest rate currently sits at a 22-year high as the central bank has introduced a series of rate increases during the past 16 months to curb inflation, which hit a peak of 9.1% in June of last year.
CNN reported that there seemed to be a consensus among Fed officials that holding rates steady at this time was the right move, with some arguing that the central bank has already hiked rates high enough to be able to bring inflation down.
The US inflation rate jumped to 3.7% last month, well above the Federal Reserve’s target level of 2%, but the fact that core inflation is falling strengthened the case for the central bank to hit the brakes on rate hikes.
Financial experts, however, believe there is a high possibility that the Fed will raise rates again after this month.
The Fed is next scheduled to meet on October 31 and November 1, with the central bank expected to assess a wide range of data on jobs, inflation, and economic growth in its next decision on interest rates.
