Research shows that it can take at least a year for those effects to fully kick in, and it’s already been about a year and half since the Fed began to lift rates. But while rising interest rates began to affect the housing market almost immediately, officials are still trying to gauge the impact on economic growth, spending and the job market. The Fed wants to defeat inflation without inflicting unnecessary economic damage that would also jack up unemployment. “We’ve gotten monetary policy in a very good place,” New York Fed President John Williams told Bloomberg earlier this month.īut even though the Fed is reassured by inflation’s steady slowdown - and the outlook - the central bank is still facing a number of uncertainties on the horizon. There is also the argument that the central bank has already raised rates high enough to eventually constrain the economy and bring inflation down to the Fed’s stated target of 2%. When it became clear the economy was not being hammered by that turbulence, the Fed raised rates again in July. The last time central bank officials decided to hold rates steady was in June, as uncertainty spiraled as to how much the spring banking crisis would constrain lending. “We can just sit there and wait for the data.” “There is nothing that is saying we need to do anything imminent anytime soon,” Fed Governor Christopher Waller told CNBC earlier this month, before the latest Consumer Price Index showed higher gas prices helped push up headline inflation in August. (Photo by Win McNamee/Getty Images) Win McNamee/Getty Imagesįed officials are divided, but holding rates steady in September seems likely The Federal Reserve begins two days of meetings today to determine its next steps in relation to interest rates in an ongoing battle against reigning in inflation. WASHINGTON, DC - MAY 02: The Federal Reserve building is shown in Washington, DC. All together, those factors give officials enough reassurance that they can pause rate hikes without risking a resurgence in price increases. Despite ongoing volatility in energy markets, inflation is also expected to keep slowing in the coming months, mostly due to easing car prices and rents. Inflation and the job market have both slowed steadily in the past year, giving the Fed enough room to hold rates steady and wait for more data to come in. Financial markets currently see a 69% chance the Fed will continue to pause rate increases in November, according to the CME FedWatch Tool. That would leave the door open for another rate increase, which could come when the following meeting concludes, on November 1. Investors will be looking for clues that the Fed is done hiking rates, but Fed Chair Jerome Powell will likely stress in his post-meeting news conference that inflation remains unacceptably high. There seems to be a consensus among Fed officials that holding rates steady this month is the right move - but some have said the Fed could raise rates again after September. Officials’ new economic projections will likely show at least one more rate hike this year. The central bank raised rates to a 22-year high in July.Īt the conclusion of its two-day policy meeting on Wednesday, the Fed is also set to release a fresh set of economic projections that will likely reflect stronger economic growth and slightly lower unemployment this year, compared with previous estimates. The Federal Reserve is expected to hold its benchmark lending rate steady this week as it waits for more data to understand how previous rate hikes are affecting the US economy.
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