For the second time this year, the Federal Open Market Committee today announced that it would not raise the federal funds rate, leaving the target range at 5.25% to 5.5%. Despite the pause, Federal Reserve Chairman Jerome Powell said that a majority of committee members expect to raise the rate at least one more time before the end of the year.
“The fact that we decided to maintain the policy rate at this meeting doesn’t mean we have decided that we have or have not, at this time, reached that stance of monetary policy that we are seeking,” Powell told reporters after the announcement.
In June, the FOMC first paused the series of rate increases that began more than a year ago. The committee raised the rate by 25 basis points during its last meeting in July, saying at the time it would evaluate the need for further hikes on a meeting-by-meeting basis. Powell today noted that wage growth has shown some signs of easing in recent months and the number of job vacancies has declined, both of which should put downward pressure on inflation. Still, inflation expectations remain “well-anchored” in the minds of the public, as shown in a broad range of surveys, he said.
“What we decided to do was maintain a policy rate and await further data,” Powell said. “We want to see convincing evidence that we have reached the appropriate level and we have seen progress—and we welcome that—but we need to see more progress before we will be willing to reach that conclusion.” The FOMC next meets at the end of October.