Breaking News: Fed Rate Hikes Expected to Cease, Beneficial for Consumers

The Federal Reserve may have completed its program of rate hikes after raising its benchmark interest rate from near zero to over 5.25% in a span of 19 months. The main objective of these rate hikes was to control inflation. However, according to the New York Times, the increases are now impacting long-term interest rates. The market has taken over some of the Fed’s responsibility in managing inflation. At present, the yield on the 10-year Treasury bond is nearing its highest point in 20 years. This yield is crucial because it influences interest rates for various borrowings, such as mortgages and corporate debt.

Fed Vice Chair Philip Jefferson has expressed the need for caution with rising Treasury yields, as reported by Reuters. Jefferson stated that the Fed is currently in a critical phase of risk management, where a balance needs to be maintained between the risk of not tightening enough and the risk of implementing overly restrictive policies. In light of these comments, the probability of a rate hike at the next Fed meeting dropped from 27% to 14%, according to the CME Group’s FedWatch. The likelihood of a rate increase at the December meeting also fell from 36% to 24%.

Raphael Bostic, President of the Federal Reserve Bank of Atlanta, stated that inflation is slowing and further rate hikes may not be necessary, unless the decline becomes stagnant, as reported by Bloomberg. These sentiments align with the minutes of the September Fed meeting, which revealed that economic data from recent months have indicated a general slowdown in inflation. Some policymakers even believe that the key interest rate has reached or is close to its maximum level, suggesting that the focus should switch from raising rates to maintaining them at their current historically high level. Rates were left unchanged after the September meeting. (Read more Federal Reserve stories.)