Fed continues monetary policy pause

As widely expected, the Federal Reserve unanimously voted to hold interest rates steady in a range of 5.25% to 5.50% for a second straight meeting, but left the door open to additional monetary policy tightening. The Fed noted “strong” economic growth, an upgrade from the “solid pace” of economic activity noted at the end of the September monetary policy meeting. The post-meeting statement noted the Fed was still watching the developing impacts of its past rate hikes as it mulled further action, cognizant of “the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”

With the Fed hitting the pause button for a second meeting in a row, markets are wondering if the tightening cycle has come to an end. U.S. interest rate futures showed reduced odds of additional rate hikes with those bets pared back to 19% and 30% for the December and January meetings, respectively.

Fed Chair Jerome Powell said policymakers will proceed cautiously as current monetary policy is restrictive and they must wait to see its effects. However, he noted the central bank could be “close” to the end of the tightening cycle and “risks are now more two-sided.” But he also said the Fed is not thinking of cutting rates. Instead, he said: “It’s fair to say the question we’re asking is should we hike more” as officials weigh how they can guide inflation back to the 2% target.