“The committee will closely monitor incoming information and assess the implications for monetary policy,” the Federal Open Market Committee said in a statement Wednesday. It omitted a line from its previous statement in March that said the committee “anticipates that some additional policy firming may be appropriate.”
Instead, the FOMC will take into account various factors “in determining the extent to which additional policy firming may be appropriate.”
The increase lifted the Fed’s benchmark federal funds rate to a target range of 5% to 5.25%, the highest level since 2007, up from nearly zero early last year. The vote was unanimous. US equities maintained gains, while Treasury yields and the dollar declined.
Policymakers are resolved to ensure inflation will continue decelerating — potentially with costs to employment — even as the banking system endures ongoing stress, lawmakers step up criticism and the latest data suggest emerging weakness in the labour market.
“Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation,” the FOMC statement said. “The extent of these effects remains uncertain. The committee remains highly attentive to inflation risks.”
In its statement Wednesday, the FOMC reiterated that “the US banking system is sound and resilient.”Tuesday also saw the release of a monthly Labor Department report showing job openings fell and layoffs jumped in March, in a sign that the job market is finally beginning to feel the impact of monetary tightening.
Still, prospects of rising unemployment are ringing alarm bells in Washington as the 2024 presidential election campaign shifts into gear.
