With unanimity, the Federal Open Market Committee held the federal funds rate in its current range, but updated projections suggest this rate-hike cycle is not yet over.
The Federal Open Market Committee (FOMC) held the federal funds rate in the 5% to 5.25% range, the first meeting since February 2022 during which the Federal Reserve didn't raise rates. The decision was unanimous and was widely expected by the markets.
Updated Fed projections suggest the rate-hike cycle is not yet over, however. The updated "dot plot" projects a year-end 2023 fed funds rate in the 5.5% to 5.75% range, or an additional 0.5% (50 basis points) in rate hikes later this year. While the Fed "skipped" a hike at this meeting, it signaled that more hikes are likely.
The statement was mostly unchanged, highlighting that economic activity has continued to expand at a modest pace, unemployment remains low, and inflation remains elevated. There was one minor tweak in the statement that further supports the case for more hikes—the statement now says that the committee will determine "the extent of additional policy firming that may be appropriate" to get back to 2% inflation. The previous statement said that the committee will determine "the extent to which additional policy firming may be appropriate" to reach their inflation target. It's a minor change but suggests that the question is now "how much" the Fed will hike rates going forward, rather than "if" it will hike rates.
Taking the statement, updated economic projections, and Fed Chair Jerome Powell's comments at the press conference together, this highlights the Fed's determination to bring inflation down by leaving open the option to hike rates more if needed.