Fed declines to hike, but points to rates staying higher for longer

cnbc.com:

The Federal Reserve held interest rates steady in a decision released Wednesday, while also indicating it still expects one more hike before the end of the year and fewer cuts than previously indicated next year.

That final increase, if realized, would do it for this cycle, according to projections the central bank released at the end of its two-day meeting. If the Fed goes ahead with the move, it would make a full dozen hikes since the policy tightening began in March 2022.

Markets had fully priced in no move at this meeting, which kept the fed funds rate in a targeted range between 5.25%-5.5%, the highest in some 22 years. The rate fixes what banks charge each other for overnight lending but also spills over into many forms of consumer debt.

While the no-hike was expected, there was considerable uncertainty over where the rate-setting Federal Open Market Committee would go from here. Judging from documents released Wednesday, the bias appears towards more restrictive policy and a higher-for-longer approach to interest rates. That outlook weighed on the market, with the S&P 500 falling after the announcement.

«We're in a position to proceed carefully in determining the extent of additional policy firming,» Chairman Jerome Powell said during a press conference.

Projections released in the Fed's dot-plot showed the likelihood of one more increase this year, then two cuts in 2024, two fewer than were indicated during the last update in June. That would put the funds rate around 5.1%. The plot allows members to indicate anonymously where they think rates are headed.

Twelve participants at the meeting penciled in the additional hike, while seven opposed it. That put one more in opposition than at the June meeting. Recently