September 20, 2023
Interest rates are officially paused…for now.
That means the interest rate – also known as the federal funds rate – will stay at 5.25%-5.5% which is the rate The Fed set at its last meeting in July. So nothing has changed – and if you’re wondering, yeah that’s the highest rate in 22 years.
But the question becomes what’s the plan for the rest of this year? Here’s the Fed Chairman.
So what does that mean?
Well, I’ve been reporting that inflation has come down significantly over the last year when it hit a peak of 9.1%. The recent inflation report found that August inflation was sitting at 3.7%. The Federal Reserve wants that number to be 2%. To do that they plan to keep raising interest rates. In fact – The Fed chairman says it’s very possible they’ll raise interest rates at least one more time this year.
He also said because this inflation is so stubborn we’re probably going to see fewer interest rate cuts in 2024 than we originally thought and it’s not going to be until 2025 until we see significant interest rate cuts. So what does the fed need to see to convince them inflation has come down enough and rate cuts are appropriate?
But a lot of people were caught off guard when the Chairman’s normally confident tone about a so-called soft landing shifted. A soft landing is what the fed calls their ability to slowly bring inflation down by raising interest rates and not automatically triggering a recession. In the past Powell seemed really confident The Fed could make it happen, but today with a government shutdown looming, the auto workers strike, federal student loan payments resuming and increasing oil prices – he started to hedge his bets.
The Federal Reserve will meet two more times in 2023 at the end of October and the middle of December. It’s very possible if the economy stays on this path, we’ll see one or maybe even two rate hikes at those meetings.
Watch the fed chairman’s full press conference here.
Read the announcement from the Fed here.
