The Federal Reserve on Wednesday again kept benchmark interest rates steady against the backdrop of economic and labor market growth and inflation, which remains well above the US central bank’s target.
In a move that was widely expected, the Fed unanimously agreed to keep the key federal funds rate in a target range of 5.25% -5.5%, the same level as it has been since July. This was the second meeting in a row that the FOMC chose to hold, after a series of 11 rate hikes, including four in 2023.
The post-meeting statement noted that “economic activity expanded at a strong pace in the third quarter,” compared to the September statement, which said that the economy expanded at a “strong pace”. The statement also noted that employment gains “moderated from earlier in the year but remain strong”.
GDP expanded at an annualized rate of 4.9% this quarter, which is even stronger than high expectations. Non-farm payroll growth totaled 336,000 in September, exceeding Wall Street expectations.
There were few other changes to the statement, other than a reference to tightening financial and credit conditions. The addition of the word “Financial” to the phrase followed the rise in Treasury bond yields, which caused concern on Wall Street. The statement went on to indicate that the committee is still “determining the extent of additional policy strengthening” that it may need to achieve its goals. “The committee will continue to assess additional information and its implications for monetary policy,”the statement said.
Wednesday’s decision to maintain interest rates comes as inflation has slowed from its rapid pace for 2022 and the labor market has been largely resilient despite interest rate hikes.
The increases are aimed at easing economic growth and rebalancing supply and demand in the labor market. There were 1.5 available jobs for every available worker in September, according to Labor Department data released earlier on Wednesday.
The core inflation rate is currently 3.7% year-on-year, according to the latest reading of the Personal Consumption Expenditures price index, which is preferred by the Fed as a price indicator.
