- The rate remained between 5% and 5.25%
- The agency also stressed that it is still targeting an inflation rate of 2%
- The Fed expects at least one more rate hike in 2023, after which a reduction is possible
- Other talking points look below
The Fed did not raise the interest rate, leaving it at 5.25%. Regulator for the first time gave a respite after 15 months of incessant “tightening of the screws. But they also noted that they did not rule out the possibility of a return to aggressive policy by the end of the year.
“In light of how far we have come in tightening measures, as well as uncertain delays and potential disincentives, we have decided to leave interest rates unchanged and continue cutting securities investments,” Fed Chairman Jerome Powell said in a briefing.
This decision was also made in light of signs of slowing inflation. This is indicated by the trend in the employment market and other macroeconomic indicators.
The Fed is still guided by the inflation rate of 2%
During his speech, Powell stressed that the policy of the regulator has remained unchanged. If necessary, the Fed will return to tough measures. In particular, the committee expects to raise the rate by another 50 basis points by the end of this year.
But the CME FedWatch Tool gives a different forecast. There is a 61% chance of a rate hike as early as July.. And by the end of the year it could be as high as 5.6%.
When is the decline expected?
When Powell says it is too early to tell.. But there has been some movement:
“I would like to say that the conditions that are necessary to reduce inflation are already being met.”
He also noted that it will take at least two years to return to the previous plateau, from 2020 to 2022. But on a positive trend, the rate could begin to decline as early as 2024.
Topics from Powell’s speech
The Fed chief also talked about this:
- A decision on the regulator’s actions in July has yet to be made. But the issue came up several times during the meeting;
- Powell expects disinflation in the housing market. He believes rents and the price of certain properties will go down;
- he also said that the “pause” should not be interpreted as a rejection of further policy tightening;
- A rate cut this year is not only possible, but appropriate;
- more, there will be at least one more increase before the end of 2023.
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