SEPTEMBER 25, 2023 – FED HOLDS RATES STEADY BUT WARNS RATES MAY RISE LATER THIS YEAR
The Fed decided at their meeting last week to hold rates steady at a 22-year high, but signaled it is likely there will be one more rate hike before the end of the year. Twelve of nineteen Fed officials favor an additional rate hike. The decision to change rates is dependent on whether the recent slowdown in inflation is sustainable. The Fed indicated they plan on keeping rates higher for longer through 2024. Rates are in the range of 5.25 percent to 5.5 percent.
Fed Chair Powell used the words “proceed carefully” six times during last week’s news conference, indicating he is comfortable where rates are and is watching how the economy plays out in the current rate scenario. As the economy has proved more resilient than expected, most officials feel rates need to stay; more or less; unchanged through 2024. Projections are for an end-of-2024 rate to be about 5 percent, which means one quarter point rate reduction if there are no additional increases this year.
The Fed predicts core inflation will be down to 3.7 percent in Q4 2023 and will fall to 2.6 percent next year. The labor market, the other key influence, has also been weakening to pre-pandemic levels.
The Fed next meets on October 31-November 1, and again in December.