Fed Chair Jerome Powell speaks during a news conference at the Federal Reserve in Washington, D.C., on July 26, 2023.The Federal Reserve left interest rates unchanged Wednesday, but signaled that it's open to an additional rate hike, if necessary, to combat stubborn inflation.
"We have come very far very fast in the rate increases that we've made," Fed chairman Jerome Powell told reporters."I think it was important at the beginning that we move quickly and we did. As we get closer to the rate that we think — the stance of monetary policy that we think — is appropriate to bring inflation down to 2% over time, the risks become more two-sided."The central bank has already raised rates 11 times in the last 18 months, most recently in July.
"It's a no-brainer for the Fed to remain sounding hawkish at this meeting," said Michael Pearce, lead U.S. economist for Oxford Economics. They want to keep the optionality of additional hikes if they need to."While inflation has fallen substantially from a four-decade high last summer, it remains well above the Fed's target of 2%. The annual inflation rate inched up to 3.7% in August from 3.2% the month before — largely as a result of rising gasoline prices.
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