Powell Says Nearly All Officials Expect 'Some' Further Fed Hikes
Federal Reserve officials paused on Wednesday following 15 months of interest-rate hikes but signaled they would likely resume tightening at some point to cool inflation.
“Holding the target range steady at this meeting allows the committee to assess additional information and its implications for monetary policy,” the Federal Open Market Committee said in a statement released in Washington Wednesday.
Policymakers also adjusted the language in their statement, referring to how they would determine “the extent of additional policy firming that may be appropriate,” rather than “the extent to which additional policy firming may be appropriate.”
The decision left the benchmark federal funds rate in a target range of 5% to 5.25%. Fresh quarterly Fed forecasts showed borrowing costs rising to 5.6% by year end, according to the median projection, compared with 5.1% in the previous round of projections.
The FOMC vote was unanimous. Of the 18 policymakers, 12 penciled in rates at or above the median range of 5.5% to 5.75%, showing most policymakers agree further tightening is needed to contain price pressures.
The forecasts imply officials expect two additional quarter-point rate hikes or one half-point increase before the end of the year.
Chair Jerome Powell said nearly all Fed officials expect it will be appropriate to raise interest rates “somewhat further” in 2023 to bring down inflation. He declined to say whether another hike could come as soon as July, but emphasized that it would be a “live meeting.”
“Inflation pressures continue to run high and the process of getting inflation back down to 2% has a long way to go,” Powell said at a post-meeting press conference.
The committee “judged it prudent” to hold rates steady this month given how quickly rates have risen, he added, saying this month’s pause in rate increases is a continuation of the moderating pace of policy measures.
“We’ve covered a lot of ground and the full effects of our tightening have yet to be felt,” the Fed chief said.
The S&P 500 index of stocks declined immediately after the decision. The dollar pared declines against a basket of currencies. Yields on two-year Treasuries surged to the highest since March.
Swaps traders lifted where they see the Fed’s peak policy rate, up to around 5.34% in September.
Powell Briefing
Wednesday’s hold is the first pit stop in the central bank’s most aggressive tightening campaign in decades to curb inflation that saw rates lifted from levels near zero starting in March 2022.
Earlier this year, stock and bond markets were roiled and four regional banks collapsed as policymakers raced to catch up after being slow to respond to mounting price pressures.
Yet the job market has remained sturdy and the inflation rate is still more than twice the Fed’s 2% target.
Both Powell and Fed Governor Philip Jefferson — nominated for vice chair by President Joe Biden — signaled they supported skipping a rate move in comments before this meeting, arguing they could afford to wait for more data as they assess the evolving outlook.
