The Blubber

The Fed has once again paused rate hikes.

The Federal Reserve once again decided to keep benchmark interest rates unchanged during its recent meeting, against the backdrop of a growing economy and a strong labor market, while inflation remains notably higher than the central bank's target.

As widely anticipated, the Fed's rate-setting committee unanimously agreed to maintain the key federal funds rate within a target range of 5.25% to 5.5%, the same level it has held since July. This marked the second consecutive meeting in which the Federal Open Market Committee opted for no change, following a series of 11 rate increases, including four in 2023.

This decision came with an improved assessment of the overall economy by the committee. Stocks responded positively to the news, with the Dow Jones Industrial Average gaining 212 points during the session.

Fed Chair Jerome Powell, during a news conference, emphasized that there is still a significant distance to go in bringing inflation down to a sustainable 2%. He stressed that the central bank has not yet made any decisions for its December meeting, underlining that "The committee will always do what it thinks is appropriate at the time."

Powell also clarified that the FOMC is not currently considering or discussing reducing interest rates.

He mentioned that the risks associated with the Fed taking excessive or insufficient action against inflation have become more balanced.

"This suggests that while there's potential for the Fed to do more, the threshold for rate hikes has risen, and we've seen this reflected in two consecutive meetings without any policy action from the Fed," said Charlie Ripley, senior investment strategist at Allianz Investment Management.

The post-meeting statement pointed out that "economic activity expanded at a strong pace in the third quarter," an upgrade from the September statement, which described the economy as having expanded at a "solid pace." The statement also acknowledged that employment gains "have moderated since earlier in the year but remain strong."

Gross domestic product (GDP) grew at an annualized rate of 4.9% in the third quarter, surpassing even high expectations. Nonfarm payrolls increased by 336,000 in September, well exceeding Wall Street's projections.

Aside from these adjustments, there were few other changes to the statement, except for the addition of "financial" to the note indicating that both financial and credit conditions had tightened. This change was in response to the increase in Treasury yields, which had raised concerns on Wall Street. The statement continued to emphasize that the committee is still "determining the extent of additional policy firming" needed to achieve its goals. "The Committee will continue to assess additional information and its implications for monetary policy," the statement concluded.