As expected, the Fed kept its key interest rate unchanged at 3.50-3.75 percent. Thus, the Fed has not changed interest rates for the fifth consecutive meeting.
The Federal Open Market Committee (FOMC) decision was approved by a majority vote of 9 to 3. Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari, and Dallas Fed President Lorie Logan voted in favor of raising the discount rate by 25 basis points.
The fact that three regional Fed presidents voted against a rate hike at the same meeting was the first such case since 2016. This decision indicated that Fed members advocating for tighter monetary policy to fight inflation were gaining strength.
Fed: Economic Activity is Growing at a Rapid Pace.
In its decision, the Federal Reserve noted that economic activity had been growing at a high rate, despite high uncertainty partly caused by conflicts in the Middle East.
The statement noted that growth in labor productivity and capital investment remained high. It also pointed out that job growth was in line with the increase in the labor force size, and the unemployment rate remained relatively stable.
The Federal Reserve also stated it would continue its policy of ensuring sufficient reserves in the banking system.
The statement on the decision emphasized that inflation remains above the Fed's 2% target. It noted that supply shocks, which have led to price increases in some sectors including energy, were adding to inflationary pressures.
The Committee stated it would continue to closely monitor economic data and risks in accordance with its goal of ensuring price stability.
Hammack, Kashkari, and Logan, who supported raising the interest rate, stated at the meeting that the target range for the federal funds rate should be increased by 25 basis points.
*This is not investment advice.
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