It turns out that the Federal Reserve doesn’t go to 11.
After 10 consecutive interest rate hikes, the central bank’s Federal Open Market Committee (FOMC) made the widely expected move of leaving interest rates unchanged when it concluded its regularly scheduled two-day policy meeting on Wednesday.
The so-called “super hawkish pause” puts at least a temporary hold on the Fed’s most aggressive campaign of tightening since the late Carter and early Reagan administrations. The Fed first began tightening in March 2022 in response to the worst bout of inflation to hit the U.S. economy in four decades.
“The choice to forgo an additional hike in June doesn’t come as much of a surprise, especially with the cooling CPI and PPI prints this week, but Fed members have continued to signal that this decision is more of a skip rather than an outright pause. The intention behind this is to give the committee the time to assess the lagged effects of the rate hikes to this point, especially as credit conditions have become tighter on households and businesses after the recent banking turmoil. While investors wouldn’t complain about extending a rally further supported by easing inflationary pressures the Fed has remained steadfast on their goal to return inflation back to 2% and don’t want to let off the brake and risk inflation reaccelerating.” – Clayton Allison, portfolio manager at Prime Capital Investment Advisors