In the statement announcing the hike, the Fed emphasized that the FOMC will continue to evaluate economic data that is coming out in the coming weeks.
For the second time in a row, the Federal Reserve chose this Wednesday to keep interest rates unchanged, although it did not rule out another increase this year and was categorical when explaining that it was not yet time to talk about the future. rate cut.
With this pause, the rates remain in the current range of 5.25% and 5.5%, their highest level since 2001.
At the moment, there is no horizon on which rates can be lowered and the Federal Open Market Committee (FOMC) of the Fed is “absolutely” thinking “about a rate cut,” said the president of the US Central Bank, Jerome Powell.
“We are not talking about rate cuts. We are still focused on the first question, which is: have we achieved a monetary policy stance that is tight enough for inflation to come down sustainably? So That’s the question,” he said in a press conference.
And, for now, that question has no answer, Powell acknowledged, because inflation will fall and stay at the 2% target sustainably still has a “long way to go.”
The Fed will maintain “a stance of monetary policy that is sufficiently tight to continue to reduce inflation to 2% over time” and rates will remain high “until we are confident that inflation is at the path to that goal.”, said.
So Powell did not rule out that in December, when the last meeting of the Committee of the year is held, there will be a new increase, although he assured that no decision on the matter was made at this meeting.
“We haven’t made the decision yet” and “we’re not talking right now about deciding in December,” he said.
In the statement announcing the increase, the Fed stressed that the FOMC will continue to evaluate economic data released in the coming weeks and the effects of monetary policy on them.
Recent economic indicators, he says, suggest “that economic activity increased at a strong pace in the third quarter,” while “employment growth has slowed since the beginning of the year, but remains stable” and “inflation remains high.”
“Tighter financial and credit conditions for households and businesses are likely to affect economic activity, hiring, and inflation,” the Fed said, adding that “the extent of these effects remains not sure.”
In this sense, “the tighter financial conditions we see from higher long-term rates, but also from other sources such as a stronger dollar and lower stock prices, may be important for future rate decisions.” Powell added.
Until June of this year, in all their meetings since the series of increases began, the members of the FOMC, the body in charge of deciding whether or not to raise rates, decided to raise them.
After stopping in June, they increased it again in July and in September they chose to stop the increase.
This pause occurs in a complex context of inflation. After a series of declines of more than a year of decline from a peak of 9.1% reached in June 2022, prices registered an increase of five-tenths in August, up to 3.7%, the second consecutive increase, and remained at the same figure in September.
However, the annual rate of core inflation, which measures the increase in prices without consideration of energy or food – and one of the indicators on which the Fed focuses in making its decisions – fell two-tenths in September and confirmed the downward trend.
This also happened when the United States registered an unexpected rebound in its gross domestic product, which increased by 1.2% in the third quarter, with an annual growth rate of 4.9%, according to data published in last week at the Bureau of Economic Statistics (BEA).
Regarding the labor market, another of the key data analyzed by the Fed to decide on a possible increase, job creation in September remained stable, with 336,000 net new jobs. , and the rate remained stable at 3.8%.
Despite strong economic data, “a remarkable history, and excellent results,” Powell said, FOCM members are convinced that “slower growth and some weakness in the labor market are likely to come up to a complete recovery of price stability”.