Fed Bypasses November, Keeps Door Open for Future Adjustments

As expected, the Fed opted to keep rates steady at 5.25-5.50% and now marking the longest period without an increase since liftoff in March of 2022.

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Despite no change in policy, however, the Fed clearly left the door open for additional policy firming should inflation concerns remain, reiterating the?language in "determining the extent of additional policy firming that may be appropriate.”??In other words, as Powell noted Speaking to the Economic Club of New York last month,?“Additional evidence of persistently above-trend growth, or that tightness in the labor market is no longer easing, could put further progress on inflation at risk and could warrant further tightening of monetary policy.”

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Furthermore, as policy makers are still struggling to reach a sufficiently restrictive level of rates, today Powell stated more clearly that the Committee isn’t thinking about or even considering rate cuts at this point.

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In its assessment of the economy, the Committee characterized economic growth as “strong,” a noticeable upgrade from “solid” last month and no doubt a reflection of a near 5% growth rate in Q3. Job gains, meanwhile, were described as “strong” and inflation “elevated.”

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The Fed also acknowledged the change in market conditions and how these factors may downplay activity. “Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation,” the statement read. The Committee remains?attentive to [higher] longer-term yields which may have implications on monetary policy, but they must be “persistent”?changes, according to Powell.?

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“The extent of these effects remains uncertain,” the Fed said, repeating that it “remains highly attentive to inflation risks.”

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The decision was unanimous.?

With few tweaks to the statement itself and the policy announcement widely anticipated, the press conference will offer further insight into?the Fed’s assessment of conditions and outlook for policy.?

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Link to November 1 FOMC Statement: https://www.federalreserve.gov/monetarypolicy/files/monetary20231101a1.pdf

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-Lindsey Piegza, Ph.D., Chief Economist?