Fed unlikely to raise interest rates


Fed unlikely to raise interest rates as wholesale inflation holds steady

03:09

The Federal Reserve on Wednesday said it is holding its benchmark interest rate steady, extending a reprieve for borrowers after the fastest series of hikes in four decades. 

The central bank said it will maintain the federal funds rate in a range of 5.25% to 5.5%, marking the third consecutive pause since July, when it last raised rates.

Fed officials have raised the federal funds rate 11 times since starting the tightening cycle in March of 2022 to combat the hottest inflation in 40 years. The strategy has largely succeeded in dousing inflation and even led prices to fall for some products, such as used cars, furniture and appliances. 

But higher borrowing costs have priced many homebuyers out of the market and added to the expense of buying cars, carrying credit card debt and taking out loans. 

Most Wall Street economists think the Fed is done with additional rate hikes, although they project the bank will likely keep the benchmark rate steady for several more months. Now, the guessing game is when policymakers might start to lower rates, with the majority of analysts forecasting May or June 2024 as when the central bank might make its first cut. 

Expectations for rate cuts in 2024 have fueled partly fueled the recent stock market rally.

Fed Chairman Jerome Powell “will undoubtedly acknowledge progress on growth and inflation and may well characterize the runway for a soft landing as widening,” noted David Kelly, chief global strategist at J.P. Morgan Asset Management in an email before the announcement. 

“However, he will not want to trigger any further rally in the stock and bond markets towards the end of the year and, consequently, his remarks may express more confidence in the outlook for real economic growth and more doubt about the decline in inflation than he really feels or the data warrant,” he added. 

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