Rates
- The FOMC voted to leave the Federal Funds target rate unchanged at a range of 5.00 – 5.25%. This was a unanimous decision by the Committee and was consistent with market expectations immediately prior to the vote.
- Even an announcement with no change to the Fed Funds rate brought news to the market. Despite providing investors an anticipated pause in rate hikes, the Committee’s new dot plot sent a hawkish signal, with the median year-end Fed Funds rate expectation rising from 5.1% to 5.6%. US equity indices closed the day with mixed results following an initially negative reaction.
- In his press conference, Fed Chair Powell noted that “nearly all Committee members expect that it will be appropriate to raise interest rates somewhat further by the end of the year”. He also indicated the Committee still believes the risks to inflation are more likely to arise on the upside.
- Powell suggested that as inflation gets closer to the Fed’s target, the committee is comfortable moderating its hikes. This likely reflects the increasingly difficult decision-making facing the Committee at each meeting as the optimal policy path becomes less clear and more sensitive to smaller movements in economic data.
Economic Projections
- The FOMC voted to leave the Federal Funds target rate unchanged at a range of 5.00 – 5.25%. This was a unanimous decision by the Committee and was consistent with market expectations immediately prior to the vote.
- Even an announcement with no change to the Fed Funds rate brought news to the market. Despite providing investors an anticipated pause in rate hikes, the Committee’s new dot plot sent a hawkish signal, with the median year-end Fed Funds rate expectation rising from 5.1% to 5.6%. US equity indices closed the day with mixed results following an initially negative reaction.
- In his press conference, Fed Chair Powell noted that “nearly all Committee members expect that it will be appropriate to raise interest rates somewhat further by the end of the year”. He also indicated the Committee still believes the risks to inflation are more likely to arise on the upside.
- Powell suggested that as inflation gets closer to the Fed’s target, the committee is comfortable moderating its hikes. This likely reflects the increasingly difficult decision-making facing the Committee at each meeting as the optimal policy path becomes less clear and more sensitive to smaller movements in economic data.
The FOMC is next scheduled to meet July 25 – 26, 2023.
Disclosures
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