Newsroom
FOMC raises rates, hints at slowing pace in December
The Federal Open Market Committee (FOMC) held its November meeting this week, where the Federal Reserve raised the federal funds target rate by 75-basis points to a range of 3.75 to 4 percent. NAFCU Chief Economist and Vice President of Research Curt Long noted the FOMC “hinted that more hikes are in store” in the latest Macro Data Flash report.
“In recognizing the scope of policy tightening thus far and the lags through which they operate, the committee is foreshadowing a slower tightening pace," commented Long. “The text provides plenty of wiggle room, but barring a hot inflation figure next week, market expectations are likely to coalesce around a 50-basis point hike in December.
“In his press conference, Chair Powell warned that a step down from the recent series of 75-basis point hikes does not imply that the rate at which the fed funds target rate ultimately lands will be lower," continued Long. “In fact, Powell noted that the recent data suggests a higher terminal rate than the committee believed previously."
Regarding future rate hikes, 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."
The FOMC’s statement noted that spending and production are growing modestly while the labor market remains tight. Inflation is still elevated and the committee reiterated a strong commitment to return inflation to the 2 percent target rate.
“All in all, this statement and press conference designed to prepare markets for a slower pace of rate increases without jumping to the conclusion that this means a hard stop or even a decline in rates,” concluded Long.
More insights can be found in the new Macro Data Flash report. The FOMC will next meet Dec. 13-14.