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Federal Reserve, 'Moving Carefully,' Maintains Interest Rates

By:
S.J. Steinhardt
Published Date:
Nov 2, 2023

iStock-487808414 Federal Reserve Washington DC

The Federal Reserve Board did not raise interest rates at its most recent meeting, but that does not mean that the central bank may not take necessary action to continue its quest to reduce inflation to 2 percent.

The Fed’s Open Market Committee (FOMC), meeting on Nov. 1, left the target range for the federal funds rate at 5-1/4 to 5-1/2 percent.

“The question we’re asking is: Should we hike more?” Chair Jerome Powell told reporters during a press briefing after the decision, Bloomberg reported. “Slowing down is giving us, I think, a better sense of how much more we need to do, if we need to do more.”

The markets reacted favorably to the FOMC decision, according to Bloomberg. The S&P 500 index closed more than 1 percent higher on the day, and the 10-year U.S. Treasury yield fell below 4.75 percent for the first time in two weeks, after the Treasury Department announced its plans to slow the pace of increase in its long-term debt sales.

“Both Fed Chair Jerome Powell and the FOMC policy statement sounded dovish overall, in our view,” said Anna Wong chief U.S. economist at Bloomberg. “Considering the hawkish ways officials could have interpreted the positive economic surprises since the September meeting, this all suggests the FOMC is inclined to go on an extended rate pause.”

Powell told reporters that decisions will be made “meeting by meeting,” and noted that the committee will have an abundance of data before December, according to Bloomberg. He said that Fed leaders are monitoring the Israel-Hamas war for economic implications.

Powell repeatedly said that the committee was moving “carefully,” a wording that often has signaled a low likelihood of any immediate change in policy, Bloomberg reported.

The Fed sees “an opening for no recession and a soft landing, and they think that is a risk they are willing to take,” said Derek Tang, an economist at LH Meyer, a policy analysis firm in Washington, in an interview with Bloomberg. The risk is “if doesn’t turn out that way, you are behind again, and you don’t want to be behind a second time."

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