The Federal Reserve decided to remain stuck to its current monetary policy. Since there is no surprise, the market reaction was easy to predict. The sixth key interest rate hike in early November failed to impress traders.
At the recent meeting, the US Fed raised the benchmark rate by 75 basis points to 3.75-4%. According to the FedWatch tool, the likelihood of such an outcome totaled 90%. The regulator is expected to continue the monetary policy tightening. In December, it may raise the key interest rate by another 50 basis points. Notably, a slower pace should not be considered as a switch to a less hawkish approach. “A Fed pause is not the same as a pivot. Certainly, deteriorating economic and credit conditions could cause the Fed to pivot modestly at some point, but a full pivot into accommodative territory is highly unlikely in the next year,” Lauren Goodwin, economist and portfolio strategist at New York Life Investments, said.
What is more, the regulator decided to keep its plans transparent and said that it considered a further rise in the interest rates to be reasonable. The key aim is still to cap the surging inflation and push it to the target of 2%. Experts earlier polled by the Wall Street Journal doubted that the Fed would be able to hike the interest rate to combat inflation without adding to unemployment and economic slump.
