Fed holds rates in 15-month first

By Cate Chapman, Editor at LinkedIn News

The Federal Reserve left interest rates unchanged for the first time in 15 months Wednesday, but signaled it could raise them twice more this year to combat inflation. The central bank, after holding the benchmark rate in a range of 5% to 5.25%, forecast another half-percentage point rise by 2024. After 10 consecutive hikes that have raised borrowing costs for everything from mortgages to business loans, the Fed said the pause would give policymakers time to “assess additional information.” Still, the central bank indicated the next rate increase could come as soon as July.

Consumer price inflation fell to an annual 4% in May, less than half the 9.1% peak last June but still double the Fed’s 2% target.
The Fed, which projects inflation will remain above target this year, lifted its GDP growth estimate for 2023 to 1% from 0.4% in March.
The central bank also lowered its unemployment forecast to 4.1% by 2024, down from an earlier estimate of 4.5%.

The Federal Reserve has unanimously skip rate hikes this month. Keeping rate @ 5.25%.

For the first time in over a year of interest rate hikes, the Federal Reserve decides not to increase rates in today’s meeting. This “hawkish skip” isn’t one to ignore:

Forecast two more rate increases in 2023: To 5.6% v 5.1% now
-Sees notably higher core inflation by end-2023: 3.9% v 3.6% in March forecast
– And sees lower unemployment: 4.1% v 4.5%
– Fed sees inflation at 2.5% by the end of 2024

Interest rate futures now no longer see ANY rate cuts in 2023 vs a couple weeks ago markets were expecting FOUR interest rate cuts by the end of 2023.

#fomc #economy #federalreserve #interestrates #finance #litrendingtopics

Federal Reserve Meeting: Fed Leaves Rates Unchanged, for Now

nytimes.com • 2 min read

The Federal Reserve paused its campaign of interest rate increases for the first time in more than a year. But officials suggested that rates would rise more in 2023, as inflation remains “well above” the central bank’s target.

Jeanna Smialek

What to know about the Fed’s latest decision.

Federal Reserve officials on Wednesday left interest rates unchanged, skipping an increase after making 10 in a row, while also predicting that they could lift them twice more this year.

In its policy statement, the Fed said it was giving itself time to assess how the economy was reacting to its campaign to wrestle rapid inflation back under control.

The central bank had already raised rates to a range of 5 to 5.25 percent over 15 months. Officials released fresh economic forecasts predicting that they might lift them even further — to 5.6 percent by the end of 2023. That would amount to two more rate increases, and it sends a clear signal that Fed officials are increasingly worried about inflation’s stubbornness. They think they will need to do more to cool growth and bring price increases under control.

“Considering how far and how fast we’ve moved, we judged it prudent to hold the target range steady,” Jerome H. Powell, the Fed chair, said at a post-meeting news conference. “We remain committed to bringing inflation back down to our 2 percent goal.”
In their updated economic projections, central bankers forecast that inflation could finish 2023 at 3.2 percent, and at 3.9 percent after stripping out food and fuel prices, a measure known as core inflation. That core projection is notably higher than the 3.6 percent that officials forecast in March, and underscores concern that price increases are proving very stubborn. “You’re just not seeing a lot of progress,” Mr. Powell said of the core inflation measure. “We want to see it moving down decisively.”
Fed officials expect the unemployment rate to rise to 4.1 percent by the end of the year, up from 3.7 percent in May but less than the 4.5 percent in their March forecast. The strength of the labor market “has surprised many if not all analysts,” Mr. Powell said. Overall, the Fed’s forecasts suggested that the economy was displaying surprising resilience. While that’s good news for workers and businesses, it could also make lowering inflation more difficult.
The Fed’s main focus right now is figuring out how much higher rates must rise to sufficiently slow the economy, Mr. Powell said. “It may make sense for rates to move higher, but at a more moderate pace,” he said, and rate cuts are “a couple of years out.” Ahead of Wednesday’s meeting, investors were betting that the Fed could begin lowering interest rates as soon as January.
Markets initially shuddered at the forecasts of future rate rises, with stocks erasing early gains and bond yields jumping higher. But those moves moderated as Mr. Powell answered reporters’ questions, emphasizing that the Fed’s forecasts for two more rate increases were expectations — not promises.