Fed holds off on rate hike, but says two more are coming later this year

WASHINGTON -- The Federal Reserve on Wednesday decided against what would have been an 11th consecutive interest rate increase as it measures what the impacts have been from the previous 10.

But the decision by the Federal Open Market Committee to hold off on a hike at this meeting came with a projection that another two quarter percentage point moves are on the way before the end of the year.

Central bankers following a two-day meeting said they will take another six weeks to see the impacts of policy moves as the Fed fights an inflation battle that lately has shown some promising if uneven signs. The decision left the Fed’s key borrowing rate in a target range of 5%-5.25%.

“Holding the target range steady at this meeting allows the Committee to assess additional information and its implications for monetary policy,” the post-meeting statement said. The Fed next meets July 25-26.

Markets had widely been anticipating the Fed to “skip” this meeting – officials generally prefer the term to a “pause” that infers a longer-range plan to keep rates where they are. The expectation leaned heavily against an increase after policymakers, particularly Chairman Jerome Powell and Vice Chair Philip Jefferson, had indicated that some change in approach could be in order.

The surprising aspect of the decision came with the “dot plot” in which the individual members of the Federal Open Market Committee indicate their expectations for rates further out.

The dots moved decidedly upward, pushing the median expectation to a funds rate of 5.6% by the end of 2023. Assuming the committee moves in quarter-point increments, that would imply two more hikes over the remaining four meetings this year.

FOMC members approved Wednesday’s move unanimously, though there remained considerable disagreement among members. Two members indicated they don’t see hikes this year while four saw one increase and nine, or half the committee, expect two. Two more members added a third hike while one saw four more, again assuming quarter-point moves.

submitted by /u/PizzaMan11554
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Created 2y | Jun 14, 2023, 9:20:52 PM


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