FOMC Meeting Review: Likely the Last Interest Rate Hike
Monetary policy in the United States comprises the Federal Reserve's actions and communications to promote maximum employment, stable prices, and moderate long-term interest rates--the economic goals the Congress has instructed the Federal Reserve to pursue.
Photo Source: BOARD OF GOVERNORS of the FEDERAL RESERVE SYSTEM
The FOMC raised rates by 25 basis points but gave no indication of its intentions for the September meeting.
Powell stated that the FOMC has not decided to hike rates every other meeting and will instead take it meeting by meeting.
He likely intended to avoid prejudging a committee decision, not to indicate a shift away from his previously stated preference for a "careful pace" of tightening in the future.
The July 2023 hike will likely be the last of the cycle.
Powell said that the FOMC will be mainly focused on the inflation data, and we expect the next few CPI reports to be soft. So, the FOMC will most likely skip September to slow the pace and conclude in November that inflation has slowed enough to make a final hike unnecessary.
A more observations from Powell’s comments:
- He did not sound concerned about the recent decline in bank lending or the tightening of bank lending standards.
- He mentioned the Fed staff no longer expects a recession.
- He clarified that in the future, the FOMC could continue QT even while cutting the funds rate.
The Fed is done.
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