The Fed Holds the Target Interest Rate Steady. This Won’t Last Much Longer.

by Ryan McMaken
Mises.org

The Federal Reserve’s Federal Open Market Committee (FOMC) announced today that it will maintain the current target policy interest rate (the federal funds rate) of 5.5 percent. The committee has now held the rate at this level since the end of July 2023.

According to the FOMC’s press release:

The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities.

After such a long period holding rates flat, it would be unprecedented for the Fed to begin a new cycle of rising rates. Given this, and given that economic indicators continue to weaken, we can be quite confident that once the FOMC feels it is politically advantageous to do so, it will force down rates even lower.

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