Posted on 09/20/23
| News Source: The Hill
The Federal Reserve kept interest rates steady Wednesday, holding off on another increase despite two consecutive months of accelerating inflation.
The Federal Open Market Committee (FOMC), the panel of Fed officials responsible for setting interest rates, said Wednesday it will keep the bank’s baseline borrowing costs at a range of 5.25 percent to 5.5 percent. The Fed in July hiked rates to that level — a 22-year high — after a brief pause in June.
Investors and economists widely expected the bank to hold rates steady in September after several months of declining job gains, an increase in unemployment and slowing economic growth across the world.
The Fed is attempting to snuff out inflation with higher interest rates without raising borrowing costs enough to slow the economy into a recession. Rate increases can take more than a year to show their full effect, which makes Fed officials wary of hiking too much, too soon.
The U.S. is still adding jobs at a stable clip and enjoyed a 3.8 percent unemployment rate in August, just 0.3 percentage points above a 50-year low set before the pandemic. Inflation also ticked higher in July and August, though largely due to energy prices beyond the Fed’s control.
Even so, the Fed is taking a more cautious approach after boosting rates rapidly since March 2022 and erring on the side of quashing inflation for much of the past two years.
Fed officials expect to raise rates once more before the end of the year, according to projections released Wednesday. They also expect the jobless rate to stay stable at 3.8 percent, economic growth of 2.1 percent and annual inflation as measured by the personal consumption expenditures (PCE) price index to land at 3.3 percent by the end of the year.
FOMC members appeared far more optimistic in September about the economy than they did in June, the last meeting after which they issued projections.