The Federal Reserve held interest rates steady on Wednesday but left the door open to further increases in borrowing costs in a policy statement that acknowledged the surprising strength of the U.S. economy but acknowledged the tight financial constraints faced by businesses and households. Conditions were also agreed upon.
“Economic activity grew at a strong pace in the third quarter,” the US central bank said in a policy statement after a two-day meeting in which officials unanimously agreed to leave the benchmark overnight interest rate in a range of 5.25%-5.50%. of. This is from July.
The language marked an upgrade from the “solid pace” of activity seen by the Fed at its September meeting and showed US gross domestic product grew at a 4.9% annual rate in the third quarter, according to recent data.
However, the market believes the Fed may raise its policy rates as financial conditions themselves are strengthening through higher market-based interest rates, pointing to a stronger-than-expected economy and labor market. The data maintained the possibility of another increase. table.
The Fed’s latest statement said that while job gains are still “strong” and inflation is still “elevated,” the central bank “continues to consider the extent of additional policymaking that could keep inflation below 2% over time.” But it might be worth bringing back.”
Fed Chairman Jerome Powell will hold a press conference at 2:30 p.m. EDT (1830 GMT) to elaborate on the statement and the economic outlook, which has so far deflated expectations of an imminent recession.
His words may take on particular significance for investors trying to gauge whether the Fed still plans to raise rates again, as most of its officials indicated in its September round of economic projections. .
The policy statement itself has become increasingly empty as officials become less certain about their next steps, balancing a sluggish but sustained decline in inflation against the prospect of a slowing of the economy in the coming months , and the concern is that too much pressure is being exerted with rate increases. This may cause it to be slower than necessary.
The statement said the Fed is still watching the lingering impact of its previous rate hikes as it considers further action, noting that “monetary policy affects economic activity and inflation and economic and financial growth.” Is.”
The phrase has been used to indicate the degree of patience in taking a decision on further rate hikes and acknowledges that the full impact of the 5.25 percentage point rate hike from March 2022 onwards has not yet been felt .
A rise in market-based interest rates is adding to the potential pressure that could further weaken economic growth.
The statement pointed to that potential impact, adding reference to tight financial conditions as one of the factors “likely to impact economic activity”, the impact of which is still uncertain.