top of page

The Federal Reserve unsurprisingly raised rates for the eleventh time


As expected, The Federal Open Market Committee (FOMC) of the Federal Reserve raised interest rates by 25 basis points on July 26, 2023. This brought the target range for the federal funds rate to 5.25%-5.50%, the highest level since January 2001.

The FOMC cited “continued strong labor market conditions and rising inflation” as the reasons for the rate hike. The committee also said that it expects to “continue to raise the target range for the federal funds rate at a gradual pace” in the coming months.

Though inflation has eased to its slowest pace in two years, Wednesday’s hike reflects the concern of the Federal Reserve officials that the economy is still growing too fast for inflation to fall back to its 2% target, according to AP News. With consumer confidence reaching its highest level in two years, American keep spending—crowding airplanes, traveling overseas, and flocking to concerts and movie theaters, and businesses keep hiring.

The most important part of the conference was that Chair Jerome Powell revealed that the Fed’s staff economists no longer foresee a recession. He said: “Given the resilience of the economy recently, they are no longer forecasting a recession.” Back in April, the Federal Reserve economists believed the anticipated recession would have had a “mild” effect on the national economy. This tells us that the Federal Reserve is more than ever convinced that the economy will be heading toward a soft landing.

The Federal Reserve's decision to raise interest rates was a delicate one. Raising rates too quickly could slow down the economy too much and lead to a recession. However, if the Fed did not raise rates enough, inflation could continue to rise and become more entrenched.

Back in June when the FOMC met, Jerome Powell signaled that the Federal Reserve was planning on raising interest rates twice more. By the time they meet again in late September, Powell noted that they will have much more data in hand: two more inflation reports, two reports on hiring and unemployment, and updated figures on consumer spending and wages; and some economists think that the Fed might decide to forgo a rate increase in September before weighing a possible hike at its meeting in November, according to AP News.

The Federal Reserve will continue to monitor inflation and economic conditions closely in the coming months. They will need to decide whether to raise interest rates again at their next meeting in September, or whether to pause to assess the impact of the July hike.

Comments

Rated 0 out of 5 stars.
No ratings yet

Add a rating

Subscribe to The Lake Street Review!

Join our email list and get access to specials deals exclusive to our subscribers.

Thanks for submitting!

bottom of page