Today, we decided to leave our policy interest rate unchanged …Federal Reserve Chair Jerome Powell on Wednesday after the nation’s central bank left its key borrowing rate unchanged.
Why It Matters: The nation’s central bank decided to hold its key borrowing rate steady, leaving the federal funds rate (which helps set other borrowing rates, such as interest rates for credit cards, car loans and mortgage rates) between 5.25%-5.5%, the highest it has been in more than 20 years. Leaving this rate at a higher level keeps borrowing money more expensive for consumers as the Federal Reserve works to combat elevated inflation by decreasing demand.
Big Picture: Wednesday’s decision was the second consecutive meeting in which the Federal Reserve maintained a steady rate. Prior to the past two meetings, the Federal Reserve raised the borrowing rate 11 consecutive times since March 2022. In its statement, the central bank explained, “The U.S. banking system is sound and resilient. Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks.” Powell also noted that the committee does not plan on discussing rate deductions anytime soon.
by Emily Hooker, based in Texas