US Fed keeps interest rates unchanged at 5.5%

November 02, 2023 (MLN): The US Federal Reserve decided to leave interest rates unchanged at 5.25%-5.5%.

To note, interest rates are at their highest level in 22 years

This marks the third time the Fed has not raised rates in the last 14 meetings.

As per the FOMC statement issued the the Federal Reserve, recent indicators suggest that economic activity expanded at a strong pace in the third quarter.

Job gains have moderated since earlier in the year but remain strong, and the unemployment rate has remained low. Inflation remains elevated.

The U.S. banking system is sound and resilient. Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation.

The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks.

The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run.

In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 5.25-5.5%.

The Committee will continue to assess additional information and its implications for monetary policy.

In determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.

In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans.

The Committee is strongly committed to returning inflation to its 2% objective.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook.

The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals.

The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

To recall, the US consumer price index (CPI) for the month of September 2023 rose by 3.7% YoY, similar to the YoY numbers in August.

Similarly, on a sequential basis, US CPI increased by 0.4% MoM as compared to 0.6% in the previous month.

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