The Federal Reserve maintains the federal funds rate unchanged and may raise it again within the year
New York, September 20th (Xinhua) - The Federal Reserve announced on September 20th that it will maintain the target range of the federal funds rate at 5.25% to 5.5%, in line with general expectations.
The Federal Reserve issued a statement after a two-day monetary policy meeting, stating that recent indicators indicate steady growth in the US economy, with slower but still strong employment growth in recent months, low unemployment rates, and high inflation rates. The US banking system is sound and resilient. The tightening of credit conditions for households and businesses may put pressure on economic activity, employment, and inflation, and the degree of related impacts remains uncertain.
The statement also stated that the Federal Reserve remains highly concerned about inflation risks. To achieve full employment and inflation targets, the Federal Reserve has decided to maintain the target range of the federal funds rate at a constant level of 5.25% to 5.5%. The committee will continue to evaluate more information and its impact on monetary policy. When determining the appropriate level of additional policy tightening, the Federal Reserve will consider the cumulative tightening of monetary policy, the impact of monetary policy on economic activity, the lag of inflation, and the development status of the economy and finance. In addition, the Federal Reserve will continue to reduce its balance sheet size as planned.
On that day, the Federal Reserve released a summary of economic forecasts that had attracted much attention from financial markets. Compared to the June summary, the Federal Reserve raised the median expected real GDP growth rate for this year by 1.1 percentage points to 2.1%, and lowered the median inflation expectations and core personal consumption expenditure price index by 0.2 percentage points to 3.7%. The matrix diagram of the interest rate hike path in the summary shows that the federal funds rate is expected to reach 5.6% by the end of 2023, which is unchanged from before; The federal funds rate is expected to drop to 5.1% by the end of 2024, up 0.5 percentage points from before.
Federal Reserve Chairman Powell said at a press conference after the monetary policy meeting that current interest rates are restrictive and have brought downward pressure to economic activity, employment, and inflation. Given the progress made in the past, we do have the ability to remain cautious as we move forward. He said that the Federal Reserve is prepared to further raise interest rates in appropriate circumstances and intends to maintain monetary policy at a restrictive level until it can be confirmed that inflation is continuing to decline towards the set target of 2%.
When Powell delivered his speech, the three major indexes of the US stock market turned from rising to falling, and US treasury bond bonds were also sold off, among which the yield of two-year, five-year and 10-year US treasury bond rose to the highest level in more than 10 years.
Bloomberg analyzed that the Federal Reserve's statement retained the relevant statement of "appropriate additional policy tightening", while Powell stated that "he is prepared to further raise interest rates in appropriate circumstances.". Based on the information in the interest rate hike path grid, the Federal Reserve is hinting at the possibility of another rate hike within this year. The market has always been angry about the idea that interest rates will remain high, while the Federal Reserve has ignored it and poured a bucket of cold water.
Since the start of this interest rate hike cycle in March last year, the Federal Reserve has raised interest rates a total of 11 times. The next monetary policy meeting will be held from October 31st to November 1st.
