The Federal Reserve made the widely expected move of leaving interest rates unchanged at a 22-year high when it wrapped up its regularly scheduled two-day policy meeting on Wednesday. Whether the central bank will go for a third straight "hawkish pause" at the next Fed meeting in December remains an open question.
There was little doubt that the Federal Open Market Committee (FOMC) would once again pause in its campaign of interest rate increases after standing pat in September. As expected, the central bank's rate-setting group left the short-term federal funds rate unchanged at a target range of 5.25% to 5.5%. Interest rate traders assigned a 99% probability to just such an outcome, according to CME Group's FedWatch Tool.
Between short-term rates sitting at a two-decade high and long-term rates topping levels not seen since 2007, market participants are increasingly convinced that the Fed is done tightening. Nevertheless, the central bank elected to keep its hawkish messaging intact.
"Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring and inflation," the FOMC said in its policy statement. "The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks."
As much progress as the central bank has made against the worst bout of rising prices to hit the U.S. economy in four decades, Fed Chair Jerome Powell said the Fed has a "long way to go" before inflation is "sustainably" below its 2% target.
"The full effects of our tightening have yet to be felt," Powell said at the post-meeting press conference. "Given how far we have come, the committee is proceeding carefully."
Powell noted that the FOMC will get to see two more jobs and inflation reports before its final meeting of the year in December. The Fed chief reiterated the central bank's commitment to being "data dependent" as it formulates its policy stance at its confab next month.
With the FOMC's latest rate decision now a matter of record, we turned to economists, strategists, investment officers and other pros for their thoughts on what the move means for markets, macroeconomics and monetary policy going forward. Please see a selection of their commentary, sometimes edited for brevity or clarity, below.
Interest rates: the experts weigh in
"Markets were fully anticipating today's no-hike decision from the Fed. With less indication of next steps than in prior decision meetings, the labor market and inflation data will need to continue being closely monitored as the Fed looks to maintain their 'soft landing' agenda." – Ben Vaske, senior investment strategist at Orion Portfolio Solutions
"Despite the U.S. economy achieving one of its strongest quarters of growth in 20 years and inflation remaining above target, the Fed maintained its current policy as tighter financial conditions, led by higher long-term interest rates, alleviated the need for a further rate hike. The economy's resilience has not stalled labor market rebalancing or revived wage and price pressures, suggesting disinflation will progress and indicating that the Fed will likely keep its policy unchanged into 2024. Nevertheless, there are risks in both directions. The rise in inflation expectations, owing to higher gas prices, combined with strong economic activity, preserves the prospect of another rate hike. Conversely, a more pronounced economic slowdown caused by the growing impact of higher interest rates might accelerate the timeline for transitioning to rate cuts." – Whitney Watson, global co-head and co-chief investment officer of fixed income and liquidity solutions at Goldman Sachs Asset Management
"The Fed remains in wait-and-see mode. Today's statement had no important changes from September. There's been continued progress on inflation despite most economic data surprising to the upside. It's now a question of waiting to see if that process continues. After more than a year of aggressive activity, policymakers can now take a pause and see if their actions are working." – David Russell, global head of market strategy at TradeStation
"It's just one month, but when you see big jobs months, the question becomes if the Fed has rates high enough. The Fed has stated that they think the Federal Funds rate is at a restrictive level, but some may ask, 'Then why isn't the job market slowing down?' The labor market remains very tight. The demand for workers is still very high. We need conditions where the supply and demand for workers is in better balance in order for inflation to reliably and sustainably be 2%." – Brian Henderson, chief investment officer at BOK Financial
"Fed meeting minutes stated: 'Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain.' How I am reading this is that the Fed believes what they are doing is working, but the results via economic data are lagged. Rather than compounding efforts and raising rates once more, they are waiting for interest rates to tame consumer spend. Fed meeting minutes also stated: 'In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans.' Read: Fed is taking money out of the markets and promoting market spend via MBS and attractive treasury yields. This will help the economy cool faster and help to keep inflation in check." – Victoria Bills, chief investment strategist at Banrion Capital Management
"As expected, the Fed rate pause continued for its second consecutive meeting. We very well may have already seen the final rate hike of this cycle, although Fed Chair Powell will likely indicate they will continue to be data-dependent concerning future rate hikes. It continues to be far too soon to declare victory on the inflation front as the Fed is laser-focused on its two percent target. The Fed currently appears to be in a very good place as it relates to their dual mandate with continued slowing of inflation over recent months and a resilient jobs market. With the recent sharp rate increases in the longer end of the curve, the market has done some work for the Fed to quell concerns of the recent implications of higher than expected economic growth. With this information the rare soft landing remains a possibility." – Dustin Thackeray, chief investment officer at Crewe Advisors
"Not surprised to see the Fed extend their pause on rate increases. I think they are basically buying themselves time to hunt for something, anything that can give them reasons to not hike and eventually cut. The reality is underlying data continues to come in pointing to a healthy economy, especially since the last pause, which has to stress the Fed because the longer the 'higher for longer' mantra plays out the greater chance of missing a potential soft landing. Even today we saw job openings unexpectedly climb for September while hiring was up and layoffs declined. If data continues to come in stronger than expected, the Fed may be hard pressed to not raise rates in December or early next year. I think we all see some cracks emerging with consumer debt, real estate data, etc. but nothing significant yet to let the Fed reverse course despite some cooling in inflation." – Scott Acheychek, CEO at REX Shares
"There is nothing surprising in today's statement and I would view the Fed as being done with raising rates, as long as our data outlook (inflation continuing to trend lower) holds. I believe that the rate hiking cycle for the Fed is over. Today marks another hawkish interest rate pause for the Fed – but why is it hawkish? Because the Fed continues to say inflation remains elevated and above the Fed's 2% goal, leaving the door open to another rate hike even as we trend towards 2%." – Rajeev Sharma, managing director of Fixed Income at Key Private Bank
Dan Burrows is Kiplinger's senior investing writer, having joined the august publication full time in 2016.
A long-time financial journalist, Dan is a veteran of SmartMoney, MarketWatch, CBS MoneyWatch, InvestorPlace and DailyFinance. He has written for The Wall Street Journal, Bloomberg, Consumer Reports, Senior Executive and Boston magazine, and his stories have appeared in the New York Daily News, the San Jose Mercury News and Investor's Business Daily, among other publications. As a senior writer at AOL's DailyFinance, Dan reported market news from the floor of the New York Stock Exchange and hosted a weekly video segment on equities.
Once upon a time – before his days as a financial reporter and assistant financial editor at legendary fashion trade paper Women's Wear Daily – Dan worked for Spy magazine, scribbled away at Time Inc. and contributed to Maxim magazine back when lad mags were a thing. He's also written for Esquire magazine's Dubious Achievements Awards.
In his current role at Kiplinger, Dan writes about equities, fixed income, currencies, commodities, funds, macroeconomics, demographics, real estate, cost of living indexes and more.
Dan holds a bachelor's degree from Oberlin College and a master's degree from Columbia University.
Disclosure: Dan does not trade stocks or other securities. Rather, he dollar-cost averages into cheap funds and index funds and holds them forever in tax-advantaged accounts.
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