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Federal Reserve Holds Interest Rates Steady Amid Inflation Concerns
· Confirmed
In Short: The Federal Reserve announced on Wednesday that it would hold interest rates steady at a target range of 3.75% to 4%, according to reports from ABC News (United States) and CBS News (United States).
The Federal Reserve announced on Wednesday that it would hold interest rates steady at a target range of 3.75% to 4%, according to reports from ABC News (United States) and CBS News (United States). The decision came after a surge in inflation, with the Consumer Price Index (CPI) rising to 3.7% in September, up from 3.4% in August, as reported by Al Jazeera (Qatar).
According to the CME Group’s FedWatch Tool, investors had put the chance of the Fed holding rates steady at about 90%, as noted by ABC News (United States) and TradingKey (United States). However, the tool also showed a 75% chance of a quarter-point rate hike at the Fed's next meeting in December, as reported by ABC News (United States) and TradingKey (United States).
The Federal Reserve’s decision was not unanimous, with two members voting to raise rates by 0.25 percentage points, as reported by CBS News (United States) and NPR (United States). The move marked the first rate increase in three years, as noted by ABC News (United States) and ABC7 Bay Area (United States).
Despite the decision to hold rates steady, the Fed acknowledged that inflation remains elevated, as stated in a press release from the central bank. The statement also noted that economic activity is growing at a strong pace, as reported by CBS News (United States).
The decision to hold rates steady was widely expected, with markets pricing in a 92% probability of no change, as reported by Economictimes (India) and Gulfnews (United Arab Emirates). However, the Fed’s statement suggested that further rate hikes could be on the horizon, as noted by The Motley Fool (United States) and Norada Real Estate Investments (United States).
The Federal Reserve’s decision comes ahead of the midterm elections, where affordability is a major concern, as mentioned in a memo by Deutsche Bank Research, as reported by ABC News (United States) and ABC7 Bay Area (United States).
The Bank of Japan raised its key policy interest rate to 1.25% from 1.00% at its September meeting, with a 7-2 majority vote, as reported by AFP (France) and Fxstreet (United Kingdom).
The Federal Reserve’s decision also had implications for the cryptocurrency market, with Bitcoin Sistemi (United States) reporting that the cryptocurrency market eagerly awaited the Fed’s announcement.
Inflation pressures continue to mount, with the September Personal Consumption Expenditures (PCE) price index set to be released on Thursday, as noted by TradingKey (United States).
The Federal Reserve’s decision to hold rates steady was met with mixed reactions, with some analysts suggesting that further hikes are likely in the coming months, as reported by Fox Business (United States) and The Motley Fool (United States).
The Federal Reserve’s decision to hold rates steady reflects a balancing act between addressing inflation and avoiding economic disruption ahead of the midterm elections, as noted by Skyler Weinand, chief investment officer at Regan Capital based in Dallas, as reported by BBC (United Kingdom).
What this adds
The Federal Reserve’s decision to hold rates steady aligns with the widely expected outcome, despite growing inflation pressures. The decision reflects the central bank's cautious approach to economic management, balancing inflation concerns with the need to avoid economic disruption ahead of the midterm elections.
Background
The Federal Reserve is set to issue an interest rate decision on Wednesday amid growing concerns over inflation.
The Federal Reserve is set to decide on interest rates amid growing concerns over inflation, with major lenders in the UK withdrawing mortgage products below 5%.
What's confirmed
- Policymakers may lose patience as they weigh whether the current level of interest rates is high enough to ease price hikes, though markets expect the central bank to hold rates steady for now.
- "We could imagine that all else equal the Fed might prefer to stay out of the headlines for raising rates just ahead of a midterm election where affordability is the principal concern," the memo said. 24/7 coverage of breaking news and live events The Federal Reserve is set to issue an interest rate decision on Wednesday as a surge of inflation puts pressure on central bankers to raise rates days before the midterm elections.
- Investors put the chance of the Fed holding rates steady on Wednesday at about 90%, according to CME Group’s FedWatch Tool, a measure of market sentiment.
- "Interest rates in the United States should be 1%, or less," Trump said.
- Prices increased 3.7% in September compared to a year earlier, putting the inflation rate more than a percentage point above the Fed's target level of 2%, data showed.
- In a memo to clients, Deutsche Bank Research said the upcoming midterms could factor into a potential decision to hold interest rates steady, though in their view the election would not be a "primary consideration."
- The move marked the first rate increase in three years.
- The rate hike should help cool off inflation by slowing the economy and eating away at demand, though such a policy move typically yields results after a lag time lasting several months.
- The central bank raised interest rates a quarter of a percentage point last month in an effort to battle back price woes.
- Fed Chairman Kevin Warsh will discuss the decision at a press conference at 2:30 p.m.
- Two FOMC members — Fed Board Governor Lisa Cook and Cleveland Federal Reserve Bank President Beth Hammack — voted to raise it by 0.25 percentage points.
What's still developing
- The Relative Strength Index (RSI) around 40 suggests subdued momentum, hinting that any corrective uptick would likely face selling interest into nearby overhead levels.
- The Bank of Japan raised interest rates to a more than 30-year high on Friday and said it would lift them further as it looks to counter inflation fuelled by surging energy prices and a weak yen.
- “Strong job growth and firmer inflation have tilted the Fed toward a September rate hike, with recent data pushing Treasury yields and mortgage rates to one-year highs,” First American Senior Economist Sam Williamson said.
- An overwhelming 85% of economists surveyed by Reuters after Friday’s inflation report — 86 of 101 — now expect the Fed to raise its target rate by a quarter percentage point, to a range of 3.75% to 4%.
- Treasury yields rose on Tuesday, with the benchmark 10-year Treasury note yield hitting its highest level since July 2007 as investors brace for what may be the first in a series of rate hikes from the Federal Reserve as it tries to tamp down inflation pressures.
- That leaves Warsh facing a communication problem almost as consequential as the interest-rate decision itself.
- The resurgence of regional hostilities is keeping attention on potential inflation pressures and the broader path of US interest rates, factors that could limit downside for the Greenback.
- The RBA governor, Michele Bullock, said inflation had been too high for most of the last six years but she was confident higher rates would bring it back down.
- Oil prices pulled back but remained elevated ahead of a critical Fed decision on Wednesday, with market expectations shifting towards a prolonged US-Iran conflict.
- Her reporting focuses on helping readers understand complex financial developments through data-driven, research-backed stories that explain how policy changes, market trends and regulatory decisions affect investors and households. <br><br> Before joining Mint, Kirti worked at ET Money, where she specialised in mutual fund research and investment analysis.
- Investors continued to track the US dollar, Treasury yields and geopolitical developments alongside the Fed decision.
- In the meantime, price increases are accelerating.