On the Site:


Fed holds interest rates steady for second time

Nov 1, 2023, 1:35 PM

Federal Reserve...

The Federal Reserve held interest rates steady Wednesday for the second consecutive meeting. (Kevin Dietsch, Getty Images)

(Kevin Dietsch, Getty Images)

Washington, DC (CNN) — The Federal Reserve held interest rates steady Wednesday for the second consecutive meeting, leaving the central bank’s benchmark lending rate at its highest level in 22 years.

Economists and financial markets had expected the pause in the Fed’s aggressive rate-hiking campaign after several Fed officials signaled they anticipate a further slowing of the US economy as it continues to absorb the effects of higher borrowing costs.

The Fed’s post-meeting statement noted that “economic activity expanded at a strong pace in the third quarter” — a recent development that has puzzled some economists.

Despite the Fed aggressively raising interest rates 11 times since March 2022 in a bid to combat inflation, the US economy has not only avoided a recession so far but instead expanded at a blistering 4.9% annualized rate in the third quarter, mostly due to solid consumer spending.

The economy’s surprising resilience is one reason behind the recent run-up in bond yields, with the benchmark 10-year US Treasury yield hovering near the 5% threshold — though it dipped below 4.8% Wednesday morning after the Treasury Department said it would auction a slightly smaller amount of debt than investors expected.

While inflation has retreated markedly from its four-decade peak last summer, it remains above the central bank’s 2% target. A red-hot economy could make the proverbial final mile of the Fed’s historic inflation fight more difficult, and possibly undo some of the welcome progress it has seen over the past year. But it’s unlikely that the third quarter’s robust economic strength will persist, simply because it was an anomaly. In the five years ahead of the Covid-19 pandemic, from 2014 to 2019, GDP growth averaged 2.6%, according to Commerce Department data.

Looking for ‘below-trend growth’

Fed officials have said they need to see consistent “below-trend growth” to ensure that inflation is on track to 2%, since red-hot demand could be maintaining some upward pressure on prices.

It’s unclear if inflation can continue to cool without both the job market and broader economy following suit. Defeating inflation without a sharp rise in unemployment would be known as a “soft landing” — and some officials are hopeful for that outcome. The good news for the Fed is that the economy is widely expected to lose some steam under the weight of higher borrowing costs due to elevated yields, tighter budgets due to the resumption of student loan repayments, depleted pandemic savings and other economic hurdles Americans are facing.

For now, the bond-market rout is playing an important role in cooling the economy, according to public remarks from several Fed officials. The Fed’s several past policy statements have all mentioned that tighter credit conditions will likely weigh on both inflation and the broader economy, but Wednesday’s statement included “financial” conditions in that usual sentence.

All eyes on the job market

Officials are also paying close attention to hiring, wages and labor demand. A weaker job market would be well received by the Fed, since it would beget similarly weaker consumption. Softer job market conditions would also mean employers feel less pressure to jack up wages to recruit talent, which could be passed on to consumers, though the extent of wage growth fueling inflation is debated among economists.

“Moderating wage growth, along with slower demand for goods and services, easing rent inflation and reduced pricing power should lead to further disinflation and argue in favor of the Fed holding the fed funds rate constant in the coming months,” wrote Lydia Boussour, senior economist at EY-Parthenon, in an analyst note.

“Looking ahead, we foresee softer labor market conditions with further hiring freezes and strategic resizing decisions along with some continued moderation in nominal wage growth,” she wrote.

The Bureau of Labor Statistics releases October data gauging the US job market Friday, including monthly job growth, wage gains, and the unemployment rate.

The-CNN-Wire™ & © 2023 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.

KSL 5 TV Live


(KSL TV)...

Matt Gephardt & Cimaron Neugebauer

Bountiful woman left without phone service or answers days after her husband dies

When you pay for a phone service, you expect it to work. But after being unable to make or receive calls despite reaching out to the provider multiple times to fix it – a Utah woman decided it was time to Get Gephardt.

18 hours ago

In the moment they feel like small purchases, right? An ornament here. A stocking stuffer there. A ...

Matt Gephardt

How you can avoid holiday debt despite the pressure to spend

In the moment they feel like small purchases, right? An ornament here. A stocking stuffer there. A last-minute office gift. But all this can quickly add up to a financial holiday hangover. And perhaps it’s one you’re still feeling from the last holiday season.

2 days ago

Cell phone...

Debbie Worthen

Scammers know how to build trust; victim wants to warn others

Jessica Turner, a mother in the midst of Halloween preparations, found herself entangled in a web of deception that would leave her financial world shattered because of a fraudulent phone call.

3 days ago

A new proposal could pave the way for some very tall buildings to be allowed in the Sugar House are...

Lindsay Aerts

New building proposal seeks to triple height of Sugar House buildings

Harbor Bay Ventures recently bought the Wells Fargo Building on the corner of 2100 South and 1100 East and plans to redevelop it.

3 days ago

Plans for The Point. (KSL TV)...

Brianna Chavez

New expansive construction plans for point of the mountain announced

Construction for a new living and working community is set to start in Draper where the state prison once stood at the point of the mountain. The new area will be known as The Point.

4 days ago

Salutatorian Alasia Baker, 17, center, and Khyli Barbee, 15, following Baker, leave a graduation ce...

Associated Press

Diplomas for sale: $465, no classes required. Inside one of Louisiana’s unapproved schools

Unlike public schools, formal homeschooling programs or traditional private schools, nearly 9,000 private schools in Louisiana don’t need state approval to grant degrees.

4 days ago

Sponsored Articles

Stylish room interior with beautiful Christmas tree and decorative fireplace...

Lighting Design

Create a Festive Home with Our Easy-to-Follow Holiday Prep Guide

Get ready for festive celebrations! Discover expert tips to prepare your home for the holidays, creating a warm and welcoming atmosphere for unforgettable moments.

Battery low message on mobile device screen. Internet and technology concept...

PC Laptops

9 Tips to Get More Power Out of Your Laptop Battery

Get more power out of your laptop battery and help it last longer by implementing some of these tips from our guide.

Users display warnings about the use of artificial intelligence (AI), access to malicious software ...

Les Olson

How to Stay Safe from Cybersecurity Threats

Read our tips for reading for how to respond to rising cybersecurity threats in 2023 and beyond to keep yourself and your company safe.

Design mockup half in white and half in color of luxury house interior with open plan living room a...

Lighting Design

Lighting Design 101: Learn the Basics

These lighting design basics will help you when designing your home, so you can meet both practical and aesthetic needs.

an antler with large horns int he wilderness...

Three Bear Lodge

Yellowstone in the Fall: A Wildlife Spectacle Worth Witnessing

While most people travel to this park in the summer, late fall in Yellowstone provides a wealth of highlights to make a memorable experience.

a diverse group of students raising their hands in a classroom...

Little Orchard Preschool

6 Benefits of Preschool for Kids

Some of the benefits of preschool for kids include developing independence, curiosity, and learning more about the world.

Fed holds interest rates steady for second time