The statement came after the release of the minutes from the August 21st meeting of the Federal Open Market Committee (FOMC) and other economic indicators. The outlook is widely driven by the growing concern over the uncertainty of the US economy, particularly as it relates to potential trade wars and slower global growth.
At the August 21st meeting, most participants saw the current policy as appropriate for the near-term as uncertainties and risks to the economic outlook emerged. In addition, they noted that the downside risks to the outlook had increased while the upside risks had declined. However, some felt that it could be appropriate to pause for a period of time to assess the impact of recent developments on the outlook.
The Fed's outlook is further compounded by the continued rise in inflation which has now reached 2.9 percent, above the Fed's target of 2.0 percent. The consumer price index (CPI) has also risen slightly since August, with core CPI now at 2.4 percent. The ongoing growth in wages also remains an area of concern as some fear it may lead to increased inflation.
In light of the uncertain economic conditions and increases in inflation, the FOMC voted to keep the target range for the federal funds rate at 2.00 to 2.25 percent. The committee also noted that it would continue to monitor the implications of incoming data for the economic outlook and will adjust policy as needed.
The Fed's statement indicates that the members are looking for a slower pace of rate hikes in the near future. This could be due to the uncertain economic conditions, including the potential impacts of trade wars and possible slower global growth. In addition, the increasing inflation and wage growth have led to concerns that further rate hikes may be needed in the future, but for now, the outlook seems to be for a more reserved approach.
In summary, the Federal Reserve's stance towards an increase in rates took a shift recently, with most officials stating that the current policy should remain in place until uncertainties die down and risks dissipate. The Fed has cited rising inflation and wage growth as issues of concern, however, it is likely that a slower rate of hikes will be employed in the near future due to the current economic climate. These measures are intended to provide some stability while market forces adjust to the new conditions.
This article was contributed on Nov 05, 2023
