Fed Hints at Pause After Latest Quarter-Point Rate Hike
In a widely expected move, the Federal Reserve on Wednesday said it would increase the federal funds rate by 25 basis points to a range of 5% to 5.25%. The rate is now at its highest since August 2007.
Wednesday’s statement from the Fed’s Federal Open Market Committee hinted that we could see a pause on future rate hikes. While the statement from the March FOMC meeting indicated that future increases might be appropriate, the latest statement said the committee would “closely monitor incoming information and assess the implications for monetary policy.”
In determining “the extent to which additional policy firming may be appropriate to return inflation to 2% over time,” the FOMC will consider “the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,” according to the statement.
CNBC reported that the markets anticipate that “slower growth and the possibility of recession will force the Fed to cut rates later this year.” Currently, though, the labor market remains resilient, and although manufacturing activity has contracted for the past six months, the services sector is pointing toward expansion, reported CNBC.