Fed says will maintain interest rate at current value amid inflation
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This comes after the central bank raised rates 11 times between March 2022 and July 2023, aiming to curb inflation that had reached levels not seen in four decades.
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Federal Reserve Chair Jerome Powell speaks during a news conference at the Federal Reserve in Washington, Wednesday, Nov. 1, 2023. (AP Photo/Susan Walsh)
The Federal Reserve, in its November policy meeting on Wednesday, opted to keep US interest rates steady, maintaining the same stance as its September decision.
This comes after the central bank raised rates 11 times between March 2022 and July 2023, aiming to curb inflation that had reached levels not seen in four decades.
US economy 'strong'
Jerome Powell, Chairman of the Federal Reserve, reported that the economy showed robust growth in the third quarter, with job gains remaining strong but moderating.
"Recent indicators suggest that economic activity expanded at a strong pace in the third quarter. Job gains have moderated since earlier in the year but remain strong, and the unemployment rate has remained low. Inflation remains elevated," the statement read.
He further emphasized the resilience of the US banking system, noting that tighter financial and credit conditions for households and businesses could impact economic activity, hiring, and inflation. However, "the extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks," the statement added.
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Stability
The Fed, through its policy-making Federal Open Market Committee, reaffirmed its dual mandate, which is to achieve maximum employment and maintain inflation at a rate of 2 percent over the longer term.
In a statement, the Committee announced its decision to maintain the federal funds rate target range at 5.25% to 5.5%. This range has been in place since July and represents the highest lending rates practiced in the US since 2001, according to records.
"The committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run," the Fed said in a statement. "In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent."
Read Chair Powell's full opening statement from the #FOMC press conference (PDF): https://t.co/4aEWYKyo1j pic.twitter.com/rxlnVWquys
— Federal Reserve (@federalreserve) November 1, 2023
However, the central bank's chairman, Jerome Powell, expressed uncertainty about whether these interest rates are high enough to bring inflation back to the 2% target annually.
Powell's remarks followed the decision to maintain the current rate range, and he stated, "We are not confident policy is sufficiently restrictive."
Risk of recession?
In terms of economic forecasts, the Federal Reserve staff did not include the risk of a recession in its baseline projection for the US economy during their meeting earlier in the day.
Powell clarified this in a press conference, indicating that the staff had not reintroduced the possibility of a recession into their forecast.
"The staff did not put a recession back in," Powell said.
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