The Federal Reserve raised the benchmark federal funds rate by 75 basis points on Nov. 2 to a target range of 3.75 to 4 percent, in line with market expectations.
The decision came after the Fed’s policy-making arm, the Federal Open Market Committee (FOMC), concluded its two-day meeting on Nov. 2.
It’s the sixth rate increase this year and the fourth consecutive 75-point increase in 2022. Interest rates are now the highest they have been since January 2008.
It was widely expected that the Fed would pull the trigger on a three-quarter-point rate boost.
Officials hinted, however, at a possible slowdown in the pace of rate increases. Financial markets had initially rallied following the announcement, with the Dow Jones Industrial Average surging as much as 300 points.
During a post-meeting press conference, Fed Chair Jerome Powell reiterated on multiple occasions throughout his remarks that the time to slow the pace of rate hikes is coming.
“So that time is coming, and it may come as soon as the next meeting or the one after that. No decision has been made,” he said.
However, when Powell told reporters that talk of a pause in the central bank’s tightening efforts is “premature,” the leading benchmark indexes erased their gains and tanked.
“It’s very premature to be thinking about pausing,” Powell said, adding that there’s still some room for policy tightening. But he stopped short of saying where the policy rate should be next year.
When asked about more clarification, Powell said, “The question of when to moderate the pace of increases is now much less important than the question of how high to raise rates and how long to keep monetary policy restrictive.”
Powell also stated that the incoming data suggested that policymakers may raise interest rates to higher levels than expected at the September meeting.
The Dow erased 500 points, and the tech-heavy Nasdaq shed more than 3 percent following Powell’s press conference.
By Andrew Moran