The Federal Reserve on Wednesday approved its 10th interest rate increase in just a little over a year and dropped a tentative hint that the current tightening cycle is at an end.
The post-meeting statement offered only some clarity, and not by what it said but what it didn't say. The statement reiterated that the Fed "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."
However, the labor market has remained strong since the increases started in March 2022. At the same time, inflation is still well above the 2% target that policymakers consider optimum. Multiple officials have said rates probably will need to stay elevated even if the increases are put on hold. The post-meeting statement noted that "tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring and inflation." The language was similar to the March statement, which came just after the collapse of Silicon Valley Bank and Signature Bank.
While higher rates have compounded the banking problems, Fed officials insist they are focused squarely on inflation. Recent data points have indicated a softening in price increases, though "sticky" items such as housing costs and medical care have remained higher, while prices that tend to change a lot, such as food and energy, actually have decelerated, according to Atlanta Fed calculations.
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