Federal Reserve officials paused on Wednesday following 15 months of interest-rate hikes but signaled they would likely resume tightening to cool inflation, projecting more increases than economists and investors expected.
“Holding the target range steady at this meeting allows the committee to assess additional information and its implications for monetary policy,” the Federal Open Market Committee said in a statement released in Washington Wednesday.
Policymakers also adjusted the language in their post-meeting statement, referring to how they would determine “the extent of additional policy firming that may be appropriate,” rather than “the extent to which additional policy firming may be appropriate.”
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The decision left the benchmark federal funds rate in a target range of 5% to 5.25%. Fresh quarterly Fed forecasts showed borrowing costs rising to 5.6% by year end, according to the median projection, compared with 5.1% in the previous round of projections.
The FOMC vote was unanimous. Of the 18 policymakers, 12 penciled in rates at or above the median range of 5.5% to 5.75%, showing most policymakers agree further tightening is needed to contain price pressures.
The S&P 500 index of stocks declined immediately after the decision. The dollar pared declines against a basket of currencies. Yields on two-year Treasuries surged to the highest since March.
Swaps traders lifted where they see the Fed’s peak policy rate, up to around 5.34% in September.
