Federal Reserve Raises Interest Rates, Does Not Expect Recession This Year
The Federal Reserve recently increased the benchmark interest rate by a quarter of a percentage point to its highest level since early 2001.
The increase takes the benchmark federal funds rate, the amount banks charge each other for overnight loans, to a target range between 5.25%-5.5%. The decision by the rate-setting Federal Open Market Committee (FOMC) was unanimous.
The increase is the 11th time the FOMC raised rates since March 2022. The committee skipped its June meeting to assess the impact the increases have had.
Regarding possible future increases, Federal Reserve Chair Jerome Powell said during a news conference, “It’s certainly possible that we will raise funds again at the September meeting if the data warranted. And I would also say it’s possible that we would choose to hold steady; and we’re going to be making careful assessments, as I said, meeting by meeting.”
Additionally, Powell confirmed the Fed no longer believes a recession will happen in 2023. This differs from previous FOMC meetings, during which the committee did indicate the possibility of a recession this year.
In its post-meeting statement, the FOMC said it “will continue to assess additional information and its implications for monetary policy.” The statement also said economic growth has shifted to “moderate” from “modest” since the June meeting.
The FOMC also signaled that it will continue to cut the bond holdings on its balance sheet, which is now at $8.32 trillion. The Fed has allowed up to $95 billion a month in maturing bond proceeds to roll off its balance sheet.