As Expected Federal Reserve Hits Pause Button, Says More Rate Hikes Coming

The US Federal Reserve has decided to pause rate hikes as it aims to assess the impact of the past rate hikes that have been some of the fastest in history. The Federal Funds Rate will remain at 5 to 5-1/4%.

The Federal Open Market Committee voted unanimously in support of the pause.

The Fed said that economic activity has been growing at a modest pace while job gains remain more robust. Inflation remains a nagging issue, though, and part of the reason more rates are probably on the way.

The rising interest rates have caused a tightening in credit, and the FOMC said, “The extent of these effects remains uncertain.”

The Committee said it will continue reducing its holdings of Treasury securities, agency debt, and agency mortgage-backed securities while maintaining its strong commitment to getting inflation back to its 2% objective.

Markets floundered a bit following the statement by the Fed as investors sought to decipher what will actually take place in the coming months. Short-term rates increased incrementally on the news.

During the Q&A session, Chairman Jerome Powell was questioned again on Federal government spending and its impact on the economy. As in the past, Chair Powell dodged the question stating fiscal policy was not part of their mandate.

Some observers believe that massive government spending in the past couple of years have been the main variable in driving inflation higher.


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