The Fed, as expected, kept its policy interest rate unchanged at 3.50-3.75 percent. Thus, the Fed did not change interest rates for the fifth consecutive meeting.
The Federal Open Market Committee (FOMC) decision was made with a 9-3 vote. Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari, and Dallas Fed President Lorie Logan voted in favor of raising the policy rate by 25 basis points.
The fact that three regional Fed presidents voted against a rate hike at the same meeting was the first time this had happened since 2016. The decision signaled that members within the Fed who advocate for tighter monetary policy to combat inflation were gaining strength.
Fed: Economic activity is growing at a strong pace
In its decision statement, the Fed noted that economic activity expanded at a strong pace despite high uncertainties, partly stemming from conflicts in the Middle East.
The statement noted that productivity growth and capital investment remained strong. It also stated that employment growth was consistent with the increase in labor force size, and the unemployment rate remained relatively stable.
The Fed also stated that it will continue its policy of ensuring sufficient reserves in the banking system.
The decision statement emphasized that inflation continues to remain above the Fed’s 2% target. It noted that supply shocks, which have driven up prices in some sectors including energy, are increasing pressure on inflation.
The committee stated that it will continue to closely monitor economic data and risks in line with its objective of ensuring price stability.
Hammack, Kashkari, and Logan, who support an interest rate hike, argued that the target range for the federal funds rate should be increased by 25 basis points at the meeting.
*This is not investment advice.