Fed remains cautious and meets expectations, leaves rates at 5.25/5.50%

fed powell nov 2023

Bankinter| The US Federal Reserve (Fed) met expectations and left the benchmark interest rate unchanged at 5.25%/5.50%.

Assessment: The Fed’s statement did not introduce any new developments and the decision met expectations by repeating rates once again. However, the key to the meeting was Powell’s message. In line with the previous meeting, the tone remained cautious. The Fed Chairman once again said that the central bank “will proceed carefully”, avoiding defining the direction of monetary policy, but insisting several times that the Committee is not yet sure that monetary policy is at a sufficiently restrictive level.

Faced with a US economy that is growing more than expected (Q3 2023 GDP: +4.9%), supported by strong employment, and inflation that remains high (CPI: +3.7% in September), although it is still slowing down, Powell is implementing a hawkish pause, keeping rates unchanged and using his speech to remind the market that the Fed’s work may not be finished (“The question we’re asking is, should we hike more?”).

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