Still Standing Steady
After breaking the streak of 11 consecutive rate hikes in September, investors had all eyes and ears focused on today’s new decision and commentary by Jerome Powell. For the second straight time, the Federal Reserve opted to hold rates steady at their current levels, a choice that fueled Wednesday’s market rallies. Since July, the federal funds rate has remained at the target range of 5.25%-5.5%, the highest it has been in roughly 16 years. The pause also led investors to project another hold that will soon follow at the FOMC meeting in December, with a polled 80% probability to hold and 20% for a 25-basis point hike.
Following September’s stronger-than-expected readings from retail sales, labor, and inflation, markets feared the Fed’s commitment to 2% inflation would have spurred discussions over another interest rate hike. However, Fed Chair Jerome Powell’s comments after the decision seems to indicate the Fed believes the economy has “moderated”; he did continue to state the path to fully eliminate higher inflation does have a long way to go, implying the Fed’s aggressive rate hike cycle may now subside to the idea of “higher rates for longer”. Despite the probabilities, Powell also made comments signaling that another rate hike for 2023 was still on the table, without any possibilities for rate cuts until later next year. As October’s economic data will soon come to the public eye, investors should monitor the strength of every figure ahead of the next FOMC meeting in December.
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I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.