The Federal Reserve left interest rates unchanged on Wednesday but signaled in new projections that borrowing costs may still need to rise by as much as half of a percentage point by the end of this year. | Reuters
Taken together, the data suggested “more restraint will be necessary than we thought,” Powell said of new projections which showed a uniform shift higher in policymakers’rate moving up another half of a percentage point beyond the current 5 percent-5.25 percent range, while three others feel it needs to go even higher.
It was a subtly optimistic message that tempered otherwise hawkish projections that see the policy rate rising higher than market participants anticipated.strategy at Societe Generale, said she thought that was no mistake, with the Fed now keeping its options open in case further rate increases are needed, but not committed if inflation does decline faster than anticipated.ADVERTISEMENT
“Holding the target range steady at this meeting allows the committee to assess additional information and its implications for monetary policy” before taking another step, the central bank’s rate-setting Federal Open Market Committee said in a unanimous policy statement at the end of its two-day meeting., the July 25-26 gathering is a “live meeting” which could bring another increase.
U.S. stocks fell after the policy decision, but by the end of the day the Nasdaq Composite and the S&P 500 indexes had closed slightly higher. The Dow Jones Industrial Average was off 0.68 percent.The Fed’s higher rate outlook coincides with an improved view of the economy and, consequently, slower progress in returning inflation to the central bank’s 2 percent target. It is currently more than double that.
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