Federal Reserve Raises Rates, Signals Potential Pause

By WSJ
Posted on 05/03/23 | News Source: WSJ

The Federal Reserve approved another quarter-percentage-point interest-rate rise and signaled it could be done lifting rates after that.

The decision Wednesday marked the Fed’s tenth consecutive rate increase aimed at battling inflation and will bring its benchmark federal-funds rate to a range between 5% and 5.25%, a 16-year high.

In a hint that officials could pause rate increases after the latest move, they cut a phrase from their previous policy statement, in March, that said some additional policy increases might be appropriate.

Instead, officials said in their new statement Wednesday they would monitor economic and financial-market developments and the effects of their earlier rate increases “in determining the extent to which additional policy firming may be appropriate to return inflation to 2% over time.”

The statement used language broadly similar to how officials concluded their interest-rate increases in 2006, with officials indicating any further change in rates was more likely to be an increase than a decrease.

All 11 voters on the rate-setting Federal Open Market Committee agreed to the decision.

The Fed raised interest rates at its previous nine meetings by a cumulative 4.75 percentage points from near zero in March 2022 through March 2023, the most rapid series of increases since the 1980s.

Officials considered skipping a rate increase in March after the failures of two regional lenders raised worries about a bank-funding crisis. But they concluded that the stresses had calmed enough on the eve of their March 22 decision to move ahead with an increase.