The Federal Reserve hit pause on interest rate hikes Wednesday.<\/p>\n\n\n\n
The Federal Open Market Committee elected to maintain a target rate for federal funds at 5 to 5.25 percent. It ended a streak of 10 straight hikes in interest rates since early 2022.<\/p>\n\n\n\n
\u201cSince early last year, the FOMC has significantly tightened the stance of monetary policy. We have raised our policy interest rate by 5 percentage points and have continued to reduce our securities holdings at a brisk pace. We have covered a lot of ground, and the full effects of our tightening have yet to be felt,\u201d said Jerome Powell, Federal Reserve Chair. \u201cIn light of how far we have come in tightening policy, the uncertain lags with which monetary policy affects the economy, and potential headwinds from credit tightening, today, we decided to leave our policy interest rate unchanged and to continue to reduce our securities holdings.\u201d<\/p>\n\n\n\n
Powell suggested the choice to hold rates steady was the continuation of the process of moderating policy. He pointed to the three previous increases of 25 basis points, after previous larger increases of 75 and 50 basis points.<\/p>\n\n\n\n
\n\u201cIt made sense to moderate our rate hikes as we got closer to our destination. So the decision not to continue hiking every meeting and ultimately to hold rates steady at this meeting, I\u00a0 would say it\u2019s a continuation of that process.\u201d<\/p>\nJerome Powell, Federal Reserve Chair<\/cite><\/blockquote>\n\n\n\n
\u201cIt made sense to moderate our rate hikes as we got closer to our destination,\u201d Powell said. \u201cSo the decision not to continue hiking every meeting and ultimately to hold rates steady at this meeting, I would say it\u2019s a continuation of that process.\u201d<\/p>\n\n\n\n
The FOMC reiterated its commitment to get inflation down to 2 percent. According to data from Bureau of Labor Statistics latest Consumer Price Index Tuesday, the annual inflation had receded to 4 percent. It is lowest 12-month increase since March 2021. The annual inflation rate was 4.9 percent in April and 5 percent in March.<\/p>\n\n\n\n
To reach its goal of bringing inflation down to 2 percent, Powell and the committee indicated the pause could be temporary.<\/p>\n\n\n\n
\u201cLooking ahead, nearly all committee participants view it as likely that some further rate increases will be appropriate this year to bring inflation down to 2 percent over time,\u201d Powell said.<\/p>\n\n\n\n
Projections placed the terminal rate at the end of 2023 at 5.6 percent. Even with the projected future hikes, Powell suggested it was time to hold steady to fully gage the impact of policy on the economy.<\/p>\n\n\n\n
\u201cNearly all committee participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year,\u201d Powell said. \u201cBut at this meeting, considering how far and how fast we have moved, we judged it prudent to hold the target range steady to allow the committee to assess additional information and its implications for monetary policy.\u201d<\/p>\n\n\n\n
As the annual inflation has waned, the Core PCE inflation, which excludes volatile food and energy prices, remains elevated at 5.3 percent.<\/p>\n\n\n\n
\u201cInflation has moderated somewhat since the middle of last year. Nonetheless, inflation pressures continue to run high and the process of getting inflation back down to 2 percent has a long way to go,\u201d Powell said.<\/p>\n\n\n\n
Even with the elevated inflation, the labor market remains strong, with unemployment at 3.7 percent. The economy has added an average of 283,000 jobs in the past three months.<\/p>\n\n\n\n
\u201cThere are some signs that supply and demand in the labor market are coming into better balance,\u201d Powell said. \u201cThe labor force participation rate has moved up in recent months, particularly for individuals aged 25 to 54 years. Nominal wage growth has shown signs of easing, and job vacancies have declined so far this year. While the jobs-to-workers gap has declined, labor demand still substantially exceeds the supply of available workers.\u201d<\/p>\n\n\n\n
Powell said the labor market\u2019s resilience has surprised all analysts.<\/p>\n\n\n\n
He also echoed his previous sentiments of a possible soft landing for the economy to avoid a recession.<\/p>\n\n\n\n
\u201cI continue to think, and this really hasn\u2019t changed, that there is a path to getting inflation back down to 2 percent without having to see the kind of sharp downturn and large losses of employment that we\u2019ve seen in so many past instances,\u201d Powell said. \u201cA strong labor market that gradually cools could aid that along.<\/p>\n\n\n\n
\u201cThe committee is completely unified in the need to get inflation down to 2 percent, and we\u2019ll do whatever it takes to get it down to 2 percent.\u201d<\/p>\n\n\n\n
The rising interest rates have impacted the used vehicle market and consumers in the past year significantly.<\/p>\n\n\n\n
According to Experian\u2019s State of Automotive Finance first quarter report, the average used car loan amount dropped in the first quarter from $28,010 at the start of 2022 to $26,420. But with the average interest rate increasing from 8.67 percent in the past year to 11.17 percent, the average monthly payment grew from $505 to $516.<\/p>\n","protected":false},"excerpt":{"rendered":"The Federal Reserve hit pause on interest rate hikes Wednesday. The Federal Open Market Committee elected to maintain…\n","protected":false},"author":1,"featured_media":3207,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"csco_singular_sidebar":"","csco_page_header_type":"","csco_appearance_grid":"","csco_page_load_nextpost":"","csco_post_video_location":[],"csco_post_video_location_hash":"","csco_post_video_url":"","csco_post_video_bg_start_time":0,"csco_post_video_bg_end_time":0,"footnotes":"","_links_to":"","_links_to_target":""},"categories":[28,9,3],"tags":[],"class_list":{"0":"post-3931","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-independent","8":"category-finance-insurance","9":"category-industry","10":"cs-entry","11":"cs-video-wrap"},"_links":{"self":[{"href":"https:\/\/niada.com\/dashboard\/wp-json\/wp\/v2\/posts\/3931","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/niada.com\/dashboard\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/niada.com\/dashboard\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/niada.com\/dashboard\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/niada.com\/dashboard\/wp-json\/wp\/v2\/comments?post=3931"}],"version-history":[{"count":0,"href":"https:\/\/niada.com\/dashboard\/wp-json\/wp\/v2\/posts\/3931\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/niada.com\/dashboard\/wp-json\/wp\/v2\/media\/3207"}],"wp:attachment":[{"href":"https:\/\/niada.com\/dashboard\/wp-json\/wp\/v2\/media?parent=3931"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/niada.com\/dashboard\/wp-json\/wp\/v2\/categories?post=3931"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/niada.com\/dashboard\/wp-json\/wp\/v2\/tags?post=3931"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}