The Federal Reserve (Fed) held its benchmark federal funds rate steady at 5.25%-5.50% on Wednesday, September 20, 2023, amid expectations of a potential rate hike in November. The decision was in line with predictions from researchers and analysts across 15 major banks, as well as market participants.
The Fed’s decision follows a similar move in June when it opted to maintain rates before implementing an increase in July. This marks the second pause in rate hikes over the last three meetings. Despite the current pause, the Fed has increased the federal funds rate 11 times since March 2022 in an attempt to curb inflation, which peaked at 9.1% in June 2022.
In addition to the interest rate decision, the Fed released new macroeconomic forecasts and Dot Plots. These will provide insights into the Fed officials’ views on inflation and offer early indications of future interest rate hikes.
Several major banks, including ANZ, Danske Bank, Commerzbank (ETR:), Nordea, Rabobank, ING, TDS, RBC Economics, NBF, SocGen, Citi, Wells Fargo, CIBC, BBH and ABN Amro have echoed the expectation that the Fed will maintain its current rates. However, many also anticipate that the Fed will signal its openness to further rate hikes if necessary.
Further insight into future monetary policy decisions will be provided during Chairman Jerome Powell’s press conference. Powell is expected to emphasize the Fed’s data-dependent approach and may hint at another rate hike due to ongoing inflationary pressure and a strong jobs market.
The current economic climate remains uncertain. With some economists predicting no economic slowdown while others forecast significant challenges due to rising consumer debt and accelerating unemployment rates. Amid this uncertainty, the Fed is attempting to balance rate hikes to manage inflation without triggering a recession.
The Fed’s decision and subsequent commentary from Powell will likely influence market activity in the coming weeks. Despite recent market pressure, there is potential for a relief bounce on Powell’s comments, although major surprises are not anticipated, suggesting continued choppy market action.
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