Federal Reserve holds steady on rate hikes for now
Federal Reserve holds steady on rate hikes for now
A day after the Federal Reserve announced it’s leaving interest rates unchanged, the big question is: Where do we go from here? The Fed gave a few clues on Wednesday with economic projections that lay out a rough road map to its goal of 2% inflation. But there will be challenges along the way.
Fed Chair Jerome Powell was almost cheerful at Wednesday’s press conference. After all, things are looking pretty good. Inflation is moving down toward the Fed’s 2% target, the tight labor market seems to be easing, and the economy is growing more than expected as it gets pushed along by consumer spending.
This is all good news, Powell said, and the Fed can always raise interest rates to cool things off if it looks like the economy might overheat.
“If the economy comes in stronger than expected, that just means we’ll have to do more in terms of monetary policy to get back to 2%,” he said. “Because we will get back to 2%.”
That is, 2% inflation. And in the economic projections released on Wednesday, a majority of Fed officials penciled in another interest rate hike this year, along with stronger economic growth. Powell noted that the central bank now has the luxury to stand pat on interest rates and just see what happens.
“Given how far we’ve come with our rate hikes and how quickly we’ve come here, we do have the ability to be careful as we move forward because of that consideration,” said Powell.
But he acknowledged there are a lot of headwinds that could blow the Fed off course. The autoworkers’ strike could affect economic output. Climbing gas prices can change consumers’ inflation expectations and a government shutdown could weigh on consumer confidence.
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