Federal Reserve officials have chosen to maintain the current benchmark interest rate, stating concerns about tighter financial conditions affecting economic activity, employment, and inflation. The Fed’s decision keeps the benchmark rate within the range of 5.25 percent to 5.50 percent, which was initially set in July and represents the highest level since rate cuts in 2007.
Despite strong third-quarter economic growth, the statement acknowledges that job gains, while still robust, have moderated compared to earlier in the year, and inflation remains elevated. The Fed expressed confidence in the stability of the U.S. banking system but highlighted the potential impact of tighter financial and credit conditions on households and businesses, with uncertainties regarding the extent of these effects.
While the Fed previously indicated the possibility of raising rates further this year, current forecasts suggest it may not hike rates in 2023 and might consider rate cuts in the middle of the following year. Futures markets reflect a two-to-one probability that the Fed will keep interest rates steady until it begins cutting them next year.
The third-quarter economic growth exceeded expectations, and the inflation rate has remained at a high level, potentially prompting a shift in the Fed’s monetary policy in the near future.
