Federal Reserve officials held the benchmark interest rate steady at the current 5.25% to 5.5% target range today as they seek to ease inflation and avoid a recession.
At the Sept. 20 conclusion of its two-day policy meeting, the Federal Open Market Committee (FOMC) announced that, while it will maintain the federal funds rate, inflation remains elevated.
The committee reiterated its commitment to returning inflation to the Fed's 2% goal and said it would be prepared to adjust its monetary policy stance “as appropriate if risks emerge” that could impede that goal. The vote by the committee, the central bank’s rate-setting group, to maintain the interest rate was unanimous.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
“Recent indicators suggest that economic activity has been expanding at a solid pace,” the FOMC said in a statement. The labor market has slowed in recent months but remains strong and the unemployment rate has remained low, it said.
“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,” FOMC said.
As it continues to monitor the economy, the committee said it will weigh the cumulative tightening of monetary policy, the lags with which the policy affects economic activity and inflation, as well as economic and financial developments.
The FOMC also said it will continue to reduce its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans.
The news comes as the Consumer Price Index (CPI) for August showed a sharp pick up in inflation as prices rose 0.6%, following just a 0.2% jump in the prior month. The index for gasoline was the largest contributor to the monthly all items increase, as Kiplinger reported.
In July, the Fed raised interest rates by 25 basis points (0.25%), bringing the short-term federal funds rate to the target range of 5.25% to 5.5%. It was the 11th rate increase since March 2022 aimed at curbing inflation, but it followed a pause in June. The move was widely expected even as Federal Reserve Chair Jerome Powell has left the door open to future hikes.
Last month at the FOMC’s annual conference in Jackson Hole, Wyoming, Powell stressed that the Fed’s job is to bring inflation down to a 2% goal.
RELATED CONTENT
-
House GOP Bill Aims to Abolish the IRS and Rewrite the Tax CodeTax Policy The stability of the IRS faces yet another challenge as the U.S. presidency changes hands.
-
More Taxes Could Slam New Yorkers Over MTA Budget ShortfallState Taxes Lawmakers warn that New Yorkers may need to brace for more taxes.
-
Blowout December Jobs Report Puts Rate Cuts on Ice: What the Experts Are SayingJobs Report The strongest surge in hiring since March keeps the Fed on hold for now.
-
Fed Sees Fewer Rate Cuts in 2025: What the Experts Are SayingFederal Reserve The Federal Reserve cut interest rates as expected, but the future path of borrowing costs became more opaque.
-
CPI Report Casts Doubt on Rate Cuts in 2025: What the Experts Are Saying About InflationCPI November Consumer Price Index data sealed the deal for a December rate cut, but the outlook for next year is less certain.
-
Rebound in Jobs Growth Keeps Fed on Track: What the Experts Are Saying
Jobs Report No nasty surprises in the November payrolls data leaves a quarter-point cut in play.
-
October CPI Report Hits the Mark: What the Experts Are Saying About Inflation
CPI While the current pace of rising prices appears to have leveled off, the expected path of rate cuts has become less certain.
-
Fed Cuts Rates Again: What the Experts Are Saying
Federal Reserve The central bank continued to ease, but a new administration in Washington clouds the outlook for future policy moves.
-
Market Reaction to Election Results: What the Experts Are SayingJobs Report Election uncertainty has been removed from the list of investors' worries, helping equities soar.
-
Jobs Growth Stalls Amid Hurricanes and Strikes: What the Experts Are SayingJobs Report A dismal October payrolls print supports the case for a slow and steady pace of rate cuts.
