Forecasts from the U.S. Federal Reserve suggest that the institution would likely increase the federal funds rate one more before the end of 2023. The announcement follows the Federal Reserve's decision to maintain the interest rate during the most recent Federal Open Market Committee (FOMC) meeting. The Federal Reserve's chairman, Jerome Powell, stressed this week that the goal of the institution is to support "the policy rate and await further data." He emphasized how crucial it is to continue to follow a "restrictive policy" in order to achieve the necessary inflation reduction.
Powell: 'We've Been Trying to Achieve a Soft Landing for All This Time'
The U.S. central bank decided to keep interest rates unchanged at the most recent FOMC meeting. Even in the midst of tightening lending conditions affecting businesses and consumers nationwide, the "sound and resilient" nature of the American banking system was emphasized in the FOMC's official statement. According to the central bank, "Recent indicators suggest that economic activity has been expanding at a solid pace."
The chairman of the Federal Reserve, Jerome Powell, held a press conference after the meeting to address the state of the American economy. Powell discussed his long-standing conviction in the viability of a "soft landing" in a conversation with multiple reporters from different news organizations. Powell has retained this conviction ever since inflation pressures first started to develop. Powell stressed further:
The main goal is to land gently. And I made no other statements. That's what we've been working toward for so long, after all. The truth is that failing to restore price stability is the worst thing we can do since the evidence is unambiguous in that regard.
The federal funds rate is likely to increase to 5.6% by year's end, according to the forward-looking predictions released by the U.S. central bank, which were emphasized by Federal Reserve board members. Twelve members of the Fed are unanimously in support of the rate increase, despite nearly seven of them expressing some hesitancy. According to the CME Fedwatch tool, investors now expect this rise to occur in December.
According to the Fedwatch tool as of September 21, 2023, there is a 68.6% chance that the rate will remain unchanged and a 31.4% chance that it will increase at the next FOMC meeting in November. There will be two more Fed meetings this year. The Bank of England and the Swiss National Bank have likewise decided to keep their interest rates unchanged in response to the Federal Reserve's considerations. The cryptocurrency market fell 1.4% over the course of a day on Thursday, while all four of the major U.S. indices ended the day in the red.
Following the FOMC meeting, there has been a period of relative calm in the market for precious metals like gold and silver. The Kobeissi Letter said on Thursday that the "average interest rate on a 30-year mortgage rises to 7.59%, its highest since December 2000." At the same time, lending rates in the United States have been under significant pressure.
Kobeissi wrote on the social media site X, "With interest rate cuts now not expected until September 2024, it is likely we will see 8% mortgages soon." The US deficit spending is so big that $1.9 trillion in bonds are being issued over two quarters, in addition to the Fed keeping rates higher for longer. This is oversupplying the bond market and raising interest rates. The average monthly payment for a new house is currently getting close to a record $2,900. What's the big picture here?
What do you believe about another federal funds rate increase from the Fed before 2023 ends? Post your ideas and viewpoints on this topic in the comments area below.