The Fed holds rates steady, pausing its rate-hiking campaign

Washington, DC (CNN) — The Federal Reserve said Wednesday it would pause its historic rate-hiking campaign as it waits for the effects to trickle further through the economy, but signaled that additional rate hikes are likely this year. The vote to skip a rate increase this meeting was unanimous. Since March 2022, Fed officials have raised the central bank’s benchmark interest rate 10 times in a row in an attempt to cool the US economy and battle inflation that is still double the Fed’s target. The Fed’s post-meeting statement confirmed that officials deem the pause a prudent move, but most officials think additional hikes are necessary this year, according to the Fed’s latest Summary of Economic Projections. "Holding the target range steady at this meeting allows the Committee to assess additional information and its implications for monetary policy," the statement said. Most officials estimate the federal funds rate will top out at a range of 5.63-5.87% in 2023, suggesting there will be at least one more rate hike this year, but most likely more, depending on the size of each hike. Future policy moves depend on what economic indicators show in the coming weeks and months, including the resilient job market. Payroll growth remains solid, as do wage gains, which put some upward pressure on prices. Top economists argue the still-tight labor market will prove to be a stubborn source of inflation that would need to rebalance in order to help inflation successfully fall to the central bank’s 2% target. Most officials in the Federal Open Market Committee, which sets monetary policy, expect the unemployment rate to rise to a range of 4-4.1% this year. Officials are also keeping a close watch on how credit conditions shape up, considering some lingering stress in the regional banking sector. Banks have been toughening their lending standards this year, and that is expected to continue. That would take some steam out of spending if US consumers have a harder time accessing credit to fund their lifestyles, especially since they have racked up debt in recent months. Americans will soon cut back on goods purchases as the shift toward services spending continues, economists say. "Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring and inflation," according to the statement. "The extent of these effects remains uncertain." Officials expect the Personal Consumption Expenditures price index to hover slightly above the central bank’s 2% target in 2024, but not fully reach 2% until 2025. This story is developing and will be updated. The-CNN-Wire ™ & © 2023 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.