Federal Reserve halts interest rate hikes after 15 months of unbridled increases

The Federal Open Market Committee argued that "economic activity has continued to expand at a modest pace."

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14 de junio, 2023

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The Federal Reserve (Fed) announced a freeze in interest rates for the first time after steady hikes over the past 15 months. In addition, it expects it to fall from the current 5.25% to 4.7% next year. In a statement, the Federal Open Market Committee explained the reasons for this decision:

Recent indicators suggest that economic activity has continued to expand at a modest pace. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated. The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run. In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 5 to 5.25%.

Federal Reserve Chairman Jerome Powell explained in a press conference that "the reason we’re comfortable pausing is much of the tightening took place last summer. So we’re stretching out into a more moderate pace."

The committee released the economic projections forecast for 2025. The unemployment rate is expected to rise to 4.5%. Inflation is expected to level out to around 2.1% and interest rates are expected to be around 3.4%. The GDP is predicted to be around 1.8% the same year.

Regarding inflation, Powell said that "many analysts would say the key to getting inflation down there is to have a continuing loosening in labor market conditions, which we have seen. There are a number of indicators suggesting that. We need to see that continue."

Rate hikes for this year

Despite the halt in rate hikes, the Fed stated that adjustments will continue to be made. Officials explained that two more quarter-point increases are expected this year.

Next meeting

Following these announcements the Federal Open Market Committee (FOMC) reported that there will be another "live" meeting on July 25 and 26 to discuss rate hikes.