Fed pauses; keeps the window open for further hikes
The Federal Open Market Committee (FOMC) of the US Federal Reserve (the Fed) decided unanimously to keep the benchmark fund rate in the range of 5.25% - 5.5%; pausing one of the sharpest hike cycles in the past four decades. Beginning in March 2022, the Fed has hiked the benchmark rate 11 times to the highest since 2001. The latest FOMC decision may be influenced by the recent evidence showing that the hikes already implemented are beginning to impact inflation, despite strong economic outcomes. Notwithstanding, its latest decision to pause, 12 out of 19 FOMC members felt that one more rate hike would be needed in 2023 before the current rate hike cycle ends, as inflation is still running above the Fed’s 2% target. The persistent strength in the economy requires caution as inflation might bounce back again. In particular, FOMC members sounded cautious about the tight labor market, as wage growth has so far accounted for the bulk of price pressures in the service sector, Higher for ...