The Federal Reserve agreed to raise interest rates by a quarter point yesterday, its 11th such rate hike since March 2022. The target range for the federal funds rate now stands at a 22-year high of 5.25% to 5.5%. Fed chair Jerome Powell said that while the economy remains healthy, inflation is still higher than the Fed would like to see, and so it’s leaving open the possibility of more rate hikes this year.
“Inflation has moderated somewhat since the middle of last year. Nonetheless, the process of getting inflation back down to 2% has a long way to go,” he said during a press conference. Core inflation is above 3%.
Powell wouldn’t speculate on when—or if—the next rate hike might come. When the Fed last met in June, it projected raising rates two more times by the end of 2023. Powell floated the possibility that the Fed might pause rate hikes when it next meets in September, but said the Fed would need to assess the data before making that decision.
The Fed appears cautiously optimistic about the state of the economy as a whole, describing it as expanding at a “moderate pace” in a statement. The labor market is still “very tight,” Powell observed, noting that the Fed’s economists no longer predict a recession by the end of the year.
“Given how far we’ve come, we can afford to be a little patient, as well as resolute,” in making decisions around raising rates, he said.
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