Fed allows all options on rates through year’s end, Fed President says

The President of the Federal Reserve System (Fed) did not clarify this Wednesday whether there will be new interest rate hikes before the end of the year, maintaining the position of waiting for additional information and analysis at each meeting.

“We are maintaining the rate and waiting for new data. We want to see, in fact, convincing evidence that we have reached the appropriate level” of increase, Jerome Powell said at a press conference following a meeting of the Federal Reserve Monetary Policy Committee (FOMC). ., its abbreviation in English).

After 11 consecutive hikes in its benchmark interest rate since March 2022, the Fed announced this Wednesday that it would pause those hikes.

“We see progress and appreciate it. But, you know, we need to see more progress before we’re ready to stop the rise,” Powell said.

“It will take time to bring inflation down to 2.0% permanently,” he warned.

The FOMC meeting ended with the base interest rate remaining in the range from 5.25% to 5.50%.

The consumer price index, expressed in annual terms, fell from a high of 9.1% in June 2022 to 3.7%. But this figure is still well above the Fed’s target of 2.0%.

The Fed’s interest rate hikes have significantly raised borrowing costs for consumers and businesses.

The Fed’s interest rate management aims to cool the U.S. economy toward a so-called “soft landing,” which means tackling rising prices without causing a recession.

Today’s FOMC decision underscores the idea that even if monetary policymakers believe they have reached a maximum on the benchmark interest rate, they will nonetheless maintain it at or near that maximum for an extended period.

In addition to acknowledging the need for additional hikes before the end of the year, Fed policymakers now acknowledge they will keep rates high through 2024.

There are now two rate cuts expected in 2024 instead of the four that were forecast in June.

The forecast is that the Fed’s benchmark interest rate will be 5.1% by the end of 2024, which is higher than it has been since the 2008-09 recession through May of this year.