Federal Reserve officials made their eighth interest rate increase in a year on Wednesday, a quarter-point move, as they continued their fight against rapid inflation. And while policymakers slowed the pace of adjustment, they signaled further rate moves to come. “We will stay the course until the job is done,” Jerome H. Powell, the Fed chair, said in a news conference.
The central bank concluded its first meeting of 2023 by announcing the smallest adjustment to rates since March. Here’s what else to know about the Fed’s moves:
Fed officials set the policy rate at a target range of 4.5 to 4.75 percent, as expected, up from near-zero at this time last year.
“Inflation has eased somewhat but remains elevated,” officials said in their statement announcing the rate decision, while reiterating that “ongoing increases in the target range will be appropriate.”
Recent signs of slowing inflation were “early stage,” Mr. Powell said. He suggested that it would be bad to realize, months from now, that the central bank had not done enough to bring inflation under control. “We’re talking about a couple more rate hikes,” he said, when asked why the Fed was continuing to raise rates while inflation was moderating.
Markets seesawed after the announcement. Some investors and analysts had expected that the phrase “ongoing increases” might be dropped from the post-meeting statement, but it wasn’t. However, when Mr. Powell said that future decisions on rates would be made meeting by meeting, stocks turned upward, reversing small losses earlier in the day.
“There is only one way forward” on the standoff over the debt limit, Mr. Powell said: Congress must raise it. “No one should assume that the Fed can protect the economy” if lawmakers fail to raise the limit, he added.
The Fed doesn’t want to prematurely declare victory over inflation. But they can finally say a disinflationary process has started. We’re talking about “a couple more” rate increases. Powell still expects to keep rates high through all of 2023 and he thinks that the Fed can pull off a soft landing: Getting inflation back to 2% without big job losses. But Mr. Powell had some stern words for lawmakers. He was clear that the debt ceiling needs to be raised, and the Fed can’t avert big problems if it isn’t.
Investors and policymakers have been in a standoff for a while now, with the Fed indicating it plans to keep rates high and markets expecting the central bank to cut rates later this year as the economy loses momentum. Powell took a shot across investors’ bow just now: “I just don’t see us cutting rates this year,” he said.
