Fed Rate Hikes May Finally Be Over

Officials say market moves are starting to tame inflation by themselves
By Rob Quinn,  Newser Staff
Posted Oct 11, 2023 2:00 PM CDT
Fed Rate Hikes May Finally Be Over
Federal Reserve Chairman Jerome Powell speaks during a news conference following the Federal Open Market Committee meeting, Wednesday, Sept. 20, 2023, in Washington.   (AP Photo/Jacquelyn Martin, File)

After raising its benchmark interest rate from near zero to more than 5.25% over 19 months, the Federal Reserve may finally be done with its program of rate hikes. The Fed has been raising short-term borrowing costs to tame inflation, but officials say the raises are now affecting long-term rates, meaning markets are now "essentially doing some of that job for them," the New York Times reports. The yield on the 10-year Treasury bond is close to a 20-year high. The Times describes the yield as "incredibly important" because it underpins interest rates on types of borrowing, including mortgages and corporate debt.

Fed Vice Chair Philip Jefferson said Tuesday that with Treasury yields rising, the Fed should "proceed carefully," reports Reuters. "We are in a sensitive period of risk management, where we have to balance the risk of not having tightened enough, against the risk of policy being too restrictive," said Jefferson. Fed officials signaled last month that there could be one more rate hike this year, but after Jefferson spoke, the estimated chance of a rate hike at the Fed's next meeting fell from 27% to 14%, according to the CME Group's FedWatch. The chance of a rate hike at the December meeting also dropped, from 36% to 24%.

Federal Reserve Bank of Atlanta President Raphael Bostic said Tuesday that inflation is slowing and the central bank doesn't need to do more unless the descent stalls, Bloomberg reports. His remarks were echoed in minutes of the Sept. 19-20 Fed meeting released Wednesday, the AP reports. Policymakers said economic data from recent months "generally suggested that inflation was slowing." Several policymakers said the key interest rate is at or near its peak, suggesting the Fed's focus should "shift from how high to raise the policy rate to how long" to keep it at a historically high level. Rates were left unchanged after the September meeting. (More Federal Reserve stories.)

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