Earlier this week, the Federal Reserve approved its tenth interest rate increase over the past 13 months. Along with this .25 percent increase, the Fed hinted that the current ‘policy firming’ cycle may be at an end. While this was not a statement that was made by the Federal Reserve, many are deducting this from the change in the statement language concerning future policy firming to combat inflation.
Federal Reserve Governor Jerome Powell made it clear during Wednesday’s news conference that there has been no official decision made to pause the cycle of rate increases. He went on to note that the change in the statement language concerning future policy firming was “meaningful”. The change he referenced is the omission of a sentence that has been present in previous statements. This week’s post-meeting statement did not include the sentence “the Committee anticipates that some additional policy firming may be appropriate” for the Fed to achieve its 2% inflation goal.
The Fed has raised borrowing costs at ten consecutive meetings. These consistent rate hikes have pushed the benchmark rate to between 5 and 5.25%. On average, that’s where Fed policymakers estimated rates would be at the end of this year, per the forecast they released in March.