US Federal Reserve Hikes Interest Rates 0.25%

The US Federal Reserve hiked another 0.25% today, to a range of 4.75-5.00%. This is the highest American interest rates have been since 2007.

Additionally, the Fed released commentary, as detailed below.

What they said: “The Committee anticipates that some additional policy firming may be appropriate.”
What they said last time: “The Committee anticipates that ongoing increases in the target range will be appropriate.”

This is a noticeable step down in rhetoric here. My argument would be that they’re likely leaving the door open to future hikes, while giving a nod to the fact that we may be close to a pause.

What they said: “The US banking system is sound and resilient. Recent developments are likely to result in tighter credit conditions for house holds and businesses, and to weigh on economic activity, hiring and inflation.”

What they said last time: “No mention of banks. More of a nod to Russia-Ukraine.”

It’d be irresponsible not to mention the banks. Tightening credit conditions is likely a big part of the *may be pausing* narrative, and can be VERY disinflationary. Also notable that the Fed seems to see the turmoil in the regional bank sector, but seems to view inflation as the bigger threat right now.

What they said: “The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of [our 2% inflation target].

What they said last time: Unchanged

To present a third category – what they could have said – “Risks specific to the banking sector have emerged, therefore we are changing our policy.” It's notable that they didn't say that.

What they said: “Inflation remains elevated.”

What they said last time: “Inflation has eased somewhat but remains elevated.”

Parsing Fedspeak is a pretty imprecise science. It may be overthinking it to look at the removal of “inflation has eased somewhat”. But the Fed releases a statement every month, and someone saw fit to remove that line.