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: On Wednesday, officials at the Federal Reserve decided to hold a key borrowing rate steady, leaving the federal funds rate (which helps set other borrowing rates, such as interest rates for credit cards or car loans) at 5.25%-5.5%, the highest it has been in more than 20 years. Leaving this rate at an elevated level makes it more expensive for consumers to borrow, as the Federal Reserve works to combat elevated inflation and decrease demand.
Big Picture: With Wednesday’s decision, the Federal Reserve also indicated it may raise its key rate one more time in 2023 (it has raised this rate 11 times since March of 2022), depending on economic conditions (inflation, labor market). Powell explained, “We’re prepared to raise rates further, if appropriate, and we intend to hold policy at a restrictive level until we’re confident that inflation is moving down sustainably toward our objective.”
Helpful Excerpt from The New York Times: “Officials are trying to figure out how to thread a needle. They want to slow the economy enough to make sure that inflation comes firmly and fully back under control. But they do not want to overdo it, crushing the economy by more than is necessary to tame price increases and tossing people out of jobs in the process.”
by Jenna Lee,