• Investing
  • Stock
Round Table Thoughts
  • Economy
  • Editor’s Pick
Home Editor's Pick Federal Reserve pauses interest rate hikes this month
Editor's Pick

Federal Reserve pauses interest rate hikes this month

by June 15, 2023
by June 15, 2023 0 comment
Share
0
FacebookTwitterPinterestWhatsapp

The Federal Reserve said Wednesday it was keeping its key interest rate at about 5% — the first time it has kept the rate steady in more than a year.

The reason for the hold: Inflation appears to be finally easing, and the Fed wants to assess whether it has already raised rates high enough to tame price increases.

Chair of the Federal Reserve Jerome Powell at a Senate hearing on March 7, 2023.Graeme Sloan / Sipa USA via AP file

Yet the Fed also signaled rates could still go higher if inflation proves sticky.

‘Inflation remains elevated,’ the Fed’s Open Market Committee said Wednesday in a statement, adding it was prepared to adjust rates ‘if risks emerge that could impede the attainment of the Committee’s goal’ of reaching a 2% inflation rate.

At the same time, the Fed also lowered its unemployment projections from 4.5% to 4.1%. The rate currently stands at 3.7%.

That means the Fed thinks it can continue to hike rates without causing mass job losses.

Amid prior soaring inflation readings, the Open Market Committee raised interest rates 10 consecutive times from March 2022 to this May.

But Tuesday, the Bureau of Labor Statistics announced that the 12-month inflation rate had fallen to 4% — the lowest reading in more than two years.

The impact of higher interest rates has been substantial, causing lending rates across the economy, from credit cards to corporate lending, to touch their highest levels in decades.

By making it more expensive to borrow and invest, the Fed has been working to slow the overall demand in the economy and thus reduce upward price pressure.

Inflation is indeed coming down — from a peak annual rate of more than 9% last June to 4% in May.

But that is still higher than the Federal Reserve’s 2% target.

So even as the central bank looks to take a break from its interest rate hikes, it plans to tell businesses and consumers there are more increases to come.

Why interest rates may stay elevated for now

‘The case to keep hiking remains strong,’ Neil Dutta, head of economic research at Renaissance Macroeconomics, a data and consultancy group, wrote in a note to clients Monday.

He noted that unemployment, at 3.7%, remains much lower than what the Fed has anticipated. Meanwhile, economic growth actually appears to be picking up, he said, citing a recent forecast from the International Monetary Fund.

What’s more, bank lending, home prices and stock prices have all begun to increase again, he said.

At least one Fed official agrees there is no need to stop the interest rate bumps now.

“I don’t really see a compelling reason to pause — meaning wait until you get more evidence to decide what to do,” Loretta Mester, president of the Federal Reserve Bank of Cleveland, said last month in an interview with the Financial Times. “I would see more of a compelling case for bringing (rates) up.”

Making the case for a pause

Others disagree that the Fed needs to stay on its current pace of hiking, citing the fact that it often takes time for tighter monetary policy to take full effect in the economy.

‘We have seen inflation continue to improve — the trend is lower,’ Angelo Kourkafas, investment strategist at Edward Jones, said in a phone interview.

In addition to an apparent slowdown in price increases, the labor market is also showing signs of weakness, he said, citing higher jobless claims, reduced hours worked and lower demand for temporary payrolls.

Another Fed official stands squarely in the wait-and-see corner.

“Maybe the majority of the tightening impact of what the Fed already did is still to come,” Austan Goolsbee, president of the Federal Reserve Bank of Chicago, said last month.

“And then you add the bank stresses on top of it,’ he said, referring to the failure of Silicon Valley Bank in March and First Republic Bank in May.

‘We have got to take that into account,” Goolsbee added.

What’s more, the Fed can always tighten monetary policy later, Kourkafas said. But it may not need to.

‘Something has to give, and growth is going to give later,’ he said.

While there is indeed a ‘foundation’ for an emerging bull market, it is likely premature to say that the nation is at the start of a new economic cycle, he said.

‘I think there is going to be some cost to tightening, in the form of slower growth down the road,’ Kourkafas said.

‘It’s not going to be a deep or prolonged downturn, but at the same time, as pandemic effects fade, like cumulative savings and pent up demand, it suggests lower customer spending, and slower economic growth,’ he said.

This post appeared first on NBC NEWS
You Might Also Like
  • Spirit AeroSystems to furlough 700 workers as Boeing machinist strike continues
  • Auto insurance rates are jumping the most since the 1970s, but there could be relief soon
  • Kroger chairman and CEO resigns following investigation into personal conduct
  • Treasury delays deadline for small businesses to file new form to avoid noncompliance fines
Share
0
FacebookTwitterPinterestWhatsapp

previous post
These 20 Republicans saved Adam Schiff from censure over Trump-Russia ‘lies’
next post
Tentative deal reached to get UPS drivers air-conditioned trucks ahead of strike threat

You may also like

Tesla shares rise on better-than-expected Q2 deliveries report

July 4, 2024

Citadel’s Ken Griffin buys a stegosaurus for $45 million in...

July 19, 2024

Trump Media auditor charged by SEC with ‘massive fraud,’ barred...

May 5, 2024

Egg prices are falling, with a dozen now less than...

March 14, 2025

Quectel Announces CC200A-LB Satellite Module for IoT Industries

March 15, 2023

Hooters to close ‘underperforming’ restaurants amid broader industry woes

June 26, 2024

Baltimore businesses see bridge fallout as a hurdle they hope...

April 7, 2024

Elizabeth Holmes appeals ‘unjust’ conviction in Theranos fraud case

April 21, 2023

Denny’s set to close dozens more locations this year, though...

February 16, 2025

Quectel Continues to Drive Digital Transformation With Advanced Smart Module,...

January 6, 2023

    Stay updated with the latest news, exclusive offers, and special promotions. Sign up now and be the first to know! As a member, you'll receive curated content, insider tips, and invitations to exclusive events. Don't miss out on being part of something special.


    By opting in you agree to receive emails from us and our affiliates. Your information is secure and your privacy is protected.

    Recent Posts

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout, pulls outlook

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025
    • The Unpredictable Stock Market: How to Make Sense of It

      May 8, 2025
    • AMD CEO calls China a ‘large opportunity’ and warns against strict U.S. chip controls

      May 7, 2025

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be...

      June 27, 2024 2,632 views
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as...

      August 9, 2024 2,339 views
    • 3

      Biden appointee played key role in recruiting Chinese...

      June 25, 2024 2,320 views
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful...

      July 10, 2024 2,302 views
    • 5

      Harris VP pick spent years promoting research facility...

      August 29, 2024 2,186 views

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Popular Posts

    • 1

      Trump-era China sanctions ended by Biden may be revived under new House GOP bill

      June 27, 2024
    • 2

      Walz’s honeymoon with China gets fresh scrutiny as Harris camp blasts ‘lying’ critics

      August 9, 2024
    • 3

      Biden appointee played key role in recruiting Chinese businesses to Delaware: ‘Longtime friends’

      June 25, 2024
    • 4

      Shein’s global ambitions leaves some cybersecurity experts fearful of Chinese spy threats

      July 10, 2024
    • 5

      Harris VP pick spent years promoting research facility that collaborated with ‘Chinese military company’

      August 29, 2024

    Latest News

    • Krispy Kreme stock plunges after doughnut chain pauses McDonald’s rollout,...

      May 8, 2025
    • Don’t Buy Robinhood Stock… Until You See This Chart Setup

      May 8, 2025
    • UnitedHealthcare sued by shareholders over reaction to CEO’s killing

      May 8, 2025

    Categories

    • Economy (7,009)
    • Editor's Pick (2,066)
    • Investing (538)
    • Stock (2,530)

    Disclaimer: RoundTableThoughts.com, its managers, its employees, and assigns (collectively “The Company”) do not make any guarantee or warranty about what is advertised above. Information provided by this website is for research purposes only and should not be considered as personalized financial advice. The Company is not affiliated with, nor does it receive compensation from, any specific security. The Company is not registered or licensed by any governing body in any jurisdiction to give investing advice or provide investment recommendation. Any investments recommended here should be taken into consideration only after consulting with your investment advisor and after reviewing the prospectus or financial statements of the company.

    Copyright © 2024 RoundTableThoughts.com. All Rights Reserved.

    Round Table Thoughts
    • Investing
    • Stock
    Round Table Thoughts
    • Economy
    • Editor’s Pick

    Read alsox

    Oscar Mayer is launching a plant-based...

    March 8, 2024

    Charlie Munger, investing genius and Warren...

    November 29, 2023

    Housing market may be thawing as...

    December 13, 2023
    Sign In

    Keep me signed in until I sign out

    Forgot your password?

    Password Recovery

    A new password will be emailed to you.

    Have received a new password? Login here