The Federal Reserve decided to leave interest rates unchanged on Wednesday, resulting in its first pause in 15 months.
The committee’s decision was led by ongoing labor market developments and low unemployment rates, as well as higher inflation, according to the central bank’s statement issued on Wednesday.
The Fed has stopped rate hikes for the first time since beginning to raise rates in March 2022. The period lasted 10 straight rate hike rounds, a policy the Fed thought would reduce the country’s greatest inflation in more than four decades, but investors have been concerned about whether a gentle landing is possible.
” Maintaining the range of targets constant at this meeting enables the Committee to evaluate additional data and its consequences for monetary policy,” central bankers noted in a statement issued Wednesday.
“The Committee will consider the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments in determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time.”
Members of the committee also highlighted that recent headwinds in the US financial sector have led to a downturn in economic circumstances, despite the Fed’s confidence that the crisis is resolved.
The FOMC’s average federal funds rate estimate for the end of 2023 was raised to 5.6% from 5.1% in prior predictions in the Federal Reserve’s summary of economic projections. This implies another 50 basis point increase in 2023.