NEW YORK (BLOOMBERG) – The Federal Reserve signalled interest rates will be higher for longer after deciding to stay on hold Wednesday while stocks fell and bond yields rose.
Big Tech led losses, with the Nasdaq 100 down 1.5 per cent. The S&P 500 dropped almost 1 per cent. Treasury two-year yields, which are more sensitive to imminent Fed moves, hit the highest since 2006. Swap contracts priced in fewer rate cuts next year than previously anticipated. The dollar erased losses. Oil retreated, following a rally that sent Brent to USD95 a barrel earlier this week.
The Fed held its target range for the federal funds rate at 5.25 to 5.5 per cent, while updated quarterly projections showed 12 of 19 officials favoured another rate hike in 2023. Policymakers also see less easing next year. Jerome Powell said officials are “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.”
Earlier Fed Chair Jerome Powell said officials are “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.”
“We are committed to achieving and sustaining a stance of monetary policy that is sufficiently restrictive to bring inflation down to our 2 per cent goal over time,” Powell said at a press conference following the decision.
Powell emphasised the Fed will “proceed carefully” as it assesses incoming data and the evolving outlook and risks, echoing remarks he made at the Fed’s annual symposium in Jackson Hole, Wyoming last month.
A possible government shutdown at the end of this month is also looming over the outlook and threatens to deprive policymakers of key data on employment and prices produced by federal agencies heading into the next Fed meeting October 31 and November 1.