Fed on hold for now
But expect a rate hike before the year’s over
The Federal Reserve held interest rates steady Wednesday for the second consecutive meeting — but signaled that another hike is possible before the year’s end as inflation remains well above its target.
At the September policy meeting, central bankers said they still believed one more hike would be necessary, which would advance the benchmark federal funds rate beyond its current 22-year high of 5.25% to 5.5%.
“Recent indicators suggest that economic activity expanded at a strong pace in the third quarter,” the Fed said Wednesday in a statement that was minimally changed from the previous meeting, when the Fed noted the US economy has been expanding at a “solid” pace.
The Fed’s statement also noted that job gains “have moderated since earlier in the year but remain strong.”
Last month, the federal government said the Consumer Price Index in September rose 3.7% — down sharply from its peak of 9.1% in June 2022, but still well above the Fed’s target rate of 2% inflation.
After the announcement, the Dow Jones Industrial Average gained 221 points, or 0.7%, while the S&P 500 rose 1.1%. The tech-dominant Nasdaq index, which dropped nearly 2% in early trading, rebounded with a 1.6% gain.
During Fed Chair Jerome Powell’s closely watched press conference following the central bank’s release, he opened with: “Without price stability, the economy does not work for anyone.”
He also noted that the economy is expanding “well above earlier expectations.”
Officials have been trying to balance two risks. They don’t want to overdo rate increases to avoid causing an unnecessarily severe downturn.
They also don’t want to allow inflation to reaccelerate or to settle at levels well above their 2% target.
“We’re getting to a place where the risks are closer to being in balance,” Powell said.
An additional rate hike before the new year appears imminent given the 12 Fed officials that said at the September meeting that they would support one more rate hike before the end of 2023.
‘ We’re getting to a place where the risks are closer to being in balance.
— Fed Chair Jerome Powell