As was widely expected, Federal Reserve Chair Jerome Powell raised borrowing costs by another 25 basis points, bringing the Federal Funds rate to 5.5%.
July’s rate increase marks the eleventh such consecutive hike, bringing the Feds funds rate higher than the tightening cycle of 2006 to 2008, when borrowing costs sat at 5.25%. According to the FOMC statement, the US economy has been expanding— albeit more moderately, but the labour market still remains resilient, with unemployment at historically low levels. Inflation, meanwhile, remains elevated.
“The US banking system is sound and resilient. Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation,” policy makers wrote, admitting that such subsequent effects on the economy remain unknown.
What has likely become mundane language with each passing rate hike, the Committee reiterated that it will continue to take into account the lagged effects of its tightened policy on the US economy, as well as inflation and financial developments when it comes to determining its next move. “In assessing the appropriate stance of monetary policy, the Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.”
Information for this story was found via the Federal Reserve and the sources and companies mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
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