Jennifer Schonberger·Senior ReporterWed, June 14, 2023, 10:13 AM EDT
The Federal Reserve is expected to hold rates interest rates steady Wednesday, but officials are likely to signal openness to raising rates again to tame stubborn inflation.
As part of its most aggressive rate hiking campaign since the 1980s, the Fed has increased the target range for its benchmark interest rate by 5 percentage points since March 2022.
The Fed’s benchmark interest rate stands in a range of 5%-5.25%, the highest level since September 2007.
Before determining how much more rates need to be raised, the central bank wants to take a step back and assess the impact of the last 10 rate hikes, along with how much the banking turmoil in the spring caused lenders to tighten credit standards.
There could be a lag of as much as a year and a half before the impact of higher rates makes its way through the US economy, several officials have noted. That pace may be slower than in earlier cycles, the World Bank said earlier this month.
While inflation has come down, it’s coming down slowly and remains well above the Fed’s 2% target. The consumer price index for May on a core basis – which strips out volatile food and energy prices – clocked in at 5.3% for May.
That compares with 5.5% seen in April and the level of 5.6% seen since January.
Today officials will lay out their latest interest rate projections decided at the June meeting as well as any tweaks to their outlook for the economy, inflation, and unemployment.
Officials estimated back in March that the peak level on their benchmark policy rate – the Fed Funds Rate – would top out at the current range of 5%-5.25% and that they would hold it at that level through the year. But a several officials saw rates topping out around 5.5%.
The Fed will announce its policy decision at 2 p.m. ET followed by Fed Chair Jerome Powell’s press conference at 2:30 p.m. ET.