Breaking News: Federal Reserve Halts Interest Rate Hikes Temporarily – Exclusive Update!

The Federal Reserve takes a break from fighting inflation and keeps interest rates steady, providing some relief for borrowers who have seen 11 rate hikes since March 2022.

According to economists polled by financial data service FactSet, the central bank’s decision to maintain the federal funds rate at 5.25% to 5.5% was expected.

Although rates are not increasing today, borrowing costs are the highest they have been in 22 years, making mortgages and credit card debt more expensive for Americans. The Fed’s goal is to curb inflation by reducing demand for items like homes and cars, and it seems to be making progress as price increases have moderated this year.

However, the Fed also indicated that it may raise rates again this year based on economic conditions. Fed Chair Jerome Powell stated, “We’re prepared to raise rates further if appropriate,” and added that the majority of meeting participants believe there will be one more rate hike before the year ends.

Credit industry analyst Matt Schulz expressed concerns about consumers’ ability to handle increasing rates, citing record-high credit card debt and delinquency rates.

Future hikes?

The Fed’s decision to keep rates steady was influenced by solid economic growth and job gains, which have slowed but remain strong. The impact of tighter credit conditions on hiring and inflation is uncertain but being closely watched by the committee.

The Fed’s projections indicate that rates will remain high until 2024, with only two anticipated interest rate cuts in 2024, down from the previously projected four cuts. Powell declined to predict when rates might be lowered but emphasized the Fed’s focus on monitoring economic data and achieving 2% annual inflation.

Ensuring price stability is essential, Powell noted.

Stronger economic growth

The Fed’s decision to keep rates high suggests concern that inflation is not decreasing quickly enough. In August, inflation rose by 3.7%, driven by higher gasoline prices, while core numbers excluding volatile costs rose 4.3% from the previous year.

Powell acknowledged the U.S. economy’s resilience despite interest rate hikes. He also mentioned ongoing developments such as the United Auto Workers’ strike and the resumption of student loan payments as factors being taken into account.

“Stronger economic activity requires more with rates,” Powell said, highlighting that lower inflation allowed for a pause in tightening this month to assess the impact of previous rate hikes.

Morgan Stanley analysts commented that the Fed’s projections suggest more growth but less inflation, which could be favorable for risk assets.

The Fed’s economic projections indicate that inflation may not reach 2% until 2026. However, there is still speculation that another rate hike may occur at the November 1 meeting.

“We believe that a rate hike on November 1 is likely unless the inflation data weakens materially between now and then, which we do not expect,” said Joseph R. Gaffoglio, president of Mutual of America Capital Management.

—With reporting by the Associated Press.

Reference

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