Fed leaves interest rates unchanged at 22-year high, signals one more hike in '23

 The Federal Reserve held interest rates steady at a 22-year high on Wednesday while signaling another rate hike will be needed later this year to bring inflation back to its 2% target.

The central bank maintained the range for its benchmark interest rate at 5.25%-5.5%, but held projections for interest rates to finish the year in a range of 5.5%-5.75%, implying one more rate hike this year.

Twelve members of the FOMC saw one more rate hike needed this year while seven members wanted to keep rates at current levels through year-end.

Officials now see interest rates falling by 0.5% next year from the expected peak rate range of 5.5%-5.75%, implying holding rates at higher levels for longer than forecast earlier this year. In June, officials officials penciled in a full percentage point worth of rate cuts for 2024.

In its statement, the Fed said future rate hikes would be contingent on the impact of previous rate hikes on the economy, the lagged effects of policy, and economic developments.

"In determining the extent to which additional policy firming may be appropriate … the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments," the statement read.

Fed officials noted they still view inflation as "elevated," and that they remain "highly attentive" to inflation risks. Still, officials lowered their outlook for inflation, which they now see ending the year at 3.7% from 3.9% forecast in June. Officials see inflation falling even lower next year to 2.6%, in-line with forecasts from June.

The Fed acknowledged that job growth has slowed, and the central bank now sees unemployment clocking in lower this year at 3.8%, down from the 4.1% previously forecast, and holding at that level through 2025.

The outlook for GDP was revised higher for the year to 2.1%, up from 1% previously. Next year’s outlook was also raised to 1.5% from 1.1%.

https://finance.yahoo.com/news/federal-reserve-leaves-interest-rates-unchanged-at-22-year-high-signals-one-more-hike-in-23-180117610.html