The Federal Reserve left interest rates unchanged for the first time since spring 2022 as inflation continues to ease. The Federal Open Market Committee left the benchmark interest rate unchanged at about 5.1 percent, the highest since 2008.
The Fed, which had previously raised interest rates ten consecutive times, initiated the pause to monitor how the economy responds to the historic rate-hiking campaign.
“Holding the target range steady at this meeting allows the Committee to assess additional information and its implications for monetary policy,” the FOMC said.
But the pause in rate hikes may be short-lived. According to new economic projections released today, members of the Federal Open Market Committee expect to hike interest rates by another 0.5 percentage points before the end of the year.
According to the FOMC statement:
Recent indicators suggest that economic activity has continued to expand at a modest pace. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated.
The U.S. banking system is sound and resilient. Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks.
The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 5 to 5-1/4 percent.
Holding the target range steady at this meeting allows the Committee to assess additional information and its implications for monetary policy. In determining the extent of additional policy firming that may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.
In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. The Committee is strongly committed to returning inflation to its 2 percent objective.