US Fed Policy: FOMC votes unanimously to keep key rates unchanged at 5.25-5.5% for second straight meeting | Mint
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Business News/ Economy / US Fed Policy: FOMC votes unanimously to keep key rates unchanged at 5.25-5.5% for second straight meeting
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US Fed Policy: FOMC votes unanimously to keep key rates unchanged at 5.25-5.5% for second straight meeting

US Federal Reserve Policy: Rate-setting FOMC led by Fed Chair Powell voted unanimously to keep the key interest rates unchanged at 5.25-5.5 per cent for the second straight meeting as US inflation still remains below the 2-per cent target

The US Federal Reserve left the benchmark interest rates unchanged at 5.25 per cent - 5.50 per cent. (Photo: AFP)Premium
The US Federal Reserve left the benchmark interest rates unchanged at 5.25 per cent - 5.50 per cent. (Photo: AFP)

The US Federal Reserve announced its interest rate decision today after a two-day Federal Open Market Committee (FOMC) meeting, leaving the benchmark interest rates unchanged at 5.25 per cent - 5.50 per cent for the second straight meeting. The Fed's decision to hold its benchmark lending rate at the same 22-year high mark gives policymakers time to "assess additional information and its implications for monetary policy," the central bank said in a statement.

US Fed Chairman Jerome Powell-led FOMC was widely expected to keep the interest rate unchanged after having raised its policy rate by 525 basis points since March 2022 to the current 5.25 per cent-5.50 per cent range, despite persistent US inflation rate levels exceeding the central bank's target range while the US economy remains resilient.

Check live updates: At 5.25-5.50%, Powell-led FOMC keeps key interest rates unchanged at 22-year high mark

The US central bank added that any future decisions on policy firming would "take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, as well as economic and financial developments."  

However, despite its aggressive monetary tightening, the Fed noted that "economic activity expanded at a strong pace in the third quarter." The gross domestic product (GDP) of the world's biggest economy expanded at an annualized rate of 4.9 per cent in the third quarter, according to the US Bureau of Economic Analysis (BEA) first estimate.

The Fed, which started raising interest rates last year, has still left the door open to a further increase due to a strong US economy. This means the central bank can further hike rates in the near-term.

When the Fed hikes interest rates it raises the cost of borrowing from the bank, which is supposed to dampen economic activity and weaken the labor market.

In a post-policy press conference, Fed Chair Jerome Powell said that the US Federal Reserve is not discussing interest rate cuts at all. Powell added that the central bank is monitoring a rise in longer-term yields.

The central bank's staff did not foresee a recession in the forecast that they provided policymakers ahead of their decision to leave interest rates unchanged, explained Powell.

Wall Street advances; Treasury yields drops after FOMC outcome

Wall Street stocks finished higher on Wednesday after the Federal Reserve kept interest rates steady, opting against hiking for the second straight time.

All three major indices climbed, with the S&P 500 ending up more than one percent as markets bet the US central bank has concluded its current program of interest rate increases.

The Dow Jones Industrial Average advanced 0.7 percent to 33,274.58. The broad-based S&P 500 climbed 1.1 percent to 4,237.86, while the tech-rich Nasdaq Composite Index jumped 1.6 percent to 13,061.47.

Benchmark 10-year Treasury yields fell to two-week lows after the Federal Reserve acknowledged the fact that the recent increase in Treasury yields has had a tightening impact on the US economy. 

The Fed is "attentive to the increase in longer-term yields, which have contributed to a tightening of broader financial conditions since the summer," said Fed Chair Powell at the press conference.

Oil prices eased about 1 per cent to a three-week low on a rising US dollar and after the US Fed policy decision. Interest rate hikes can slow economic growth and dampen oil demand. A strong dollar makes it more expensive to buy fuel using other currencies, pressuring prices.

Brent futures fell 39 cents, or 0.5 per cent, to settle at $84.63 a barrel. U.S. West Texas Intermediate (WTI) crude fell 58 cents, or 0.7 per cent, to $80.44. This was the lowest settlement for Brent since October 6 and WTI since August 28. Both contracts settled below their 100-day moving averages, a key level of technical support since July, according to news agency Reuters.

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Published: 01 Nov 2023, 11:44 PM IST
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