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Federal Reserve holds interest rates steady

Two divergent perspectives on what comes next

Fed Char Jerome Powell (Credit: Office of the Federal Reserve)

As expected, the Federal Reserve announced yesterday that it would not raise interest rates. However, the policy statement indicated that it will take a “wait-and-see” approach to future hikes. This signals a major shift from just last month when the Fed indicated at least one rate hike this year. 

Two divergent perspectives on what comes next

Fitch Ratings told the NYTimes: “This is more like a pause than a strong signal that they believe that they are the end of the hiking cycle… Barring a very significant global downturn, we still see further rate increases later this year.”

Barclays told Bloomberg: “It’s hard to read this as anything other than the Fed has capitulated to the market… They made clear that they’re done with the hiking cycle.”

Worth Noting: The Fed also signaled more flexibility in its plans for shrinking its multi trillion-dollar balance sheet. In a statement, officials said the Central Bank is “prepared to adjust any of the details for completing balance sheet normalization in light of economic and financial developments.”

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