FOMC Lifts Key Rate Quarter-Point, Leaves Door Open to More Hikes
The Federal Open Market Committee announced a widely expected 0.25 percentage point interest rate increase in the Fed funds rate on Wednesday, bringing the benchmark overnight interest rate to between 5.25%-5.50%.
It’s the 11th hike since the Fed began to tighten monetary policy in March 2022 and brings the rate to the highest level in 22 years.
The Fed repeated that “determining the extent of additional policy firming that will be appropriate” to lower inflation to the Fed’s 2% target will depend on inflation as well as economic and financial developments, among other factors.
“Recent indicators suggest that economic activity has been expanding at a moderate pace,” read the statement. “Job gains have been robust in recent months, and the unemployment rate has remained low,” the committee said, repeating previous language, while also noting again that “inflation remains elevated.”
In June, most officials predicted two more rate hikes in 2023. The lack of fresh language to the suggest otherwise means the door remains open, which would imply another rate hike in the coming months.
Responding to the FOMC action, Charles Krawitz, chief capital markets officer at Alliant Credit Union, said, “The Fed has been very clear in their messaging about inflation and the need to boost rates until wage pressures and prices moderate in line with their 2% target, Given this, the 25-bp rate increase is a signal that the Fed remains committed to further rate increases predicated on data.
“After another potential rate increase in September, it is largely assumed that rates will stabilize and then start to head down. While the precise timing of these movements remains conjecture, the overall trajectory seems to be widely embraced.”
Joe Palmisano is Editorial Director for Connect Money, where he brings nearly three decades experience of market insights as a financial journalist, analyst and senior portfolio manager for leading financial publications, advisory firms, and hedge funds.
In his role as Editorial Director, Joe is responsible for the selection of content and creation of daily business news covering the financial markets, including Alternative Assets, Direct Investment and Financial Advisory services.
Before joining Connect Money, Joe was a financial journalist for the Wall Street Journal, regularly publishing feature stories and trend pieces on the foreign exchange, global fixed income and equity markets.
Joe parlayed his experience as a financial journalist into roles as a Senior Research Analyst and Portfolio Manager, writing daily and weekly market analysis and managing a FX and US equity portfolio.
Joe was also a contributing writer for industry magazines and publications, including SFO Magazine and the CMT Association.
Joe earned a B.S.B.A. in Finance from The American University. He holds the Chartered Market Technician (CMT) designation and is a member of the CFA Institute.