Fed Holds Interest Rates Steady, Warns Borrowing Costs to Remain High

The US Federal Reserve holds interest rates steady and signals borrowing costs will likely stay higher for a longer period

September 20, 2023 | 01:24 PM

Bloomberg Línea — The Federal Open Market Committee (FOMC) of the Federal Reserve decided this Wednesday to maintain the interest rate unchanged at a range of 5.25% to 5.50%. The expectation of no change was unanimous among Wall Street economists.

Despite making no changes this Wednesday, the US central bank signaled that rates are expected to stay higher for a longer duration and left “the door open” for another hike later this year, which was also anticipated.

Following the decision, stock indices in the United States continued without a clear direction. Around 3:10 PM (Brasília time), the S&P 500 was up 0.16%, while the Nasdaq 100, with significant exposure to the technology sector, was down 0.44%. The dollar reversed its decline, and the Ibovespa (IBOV) reduced its rate of increase to 1.16%.

In the statement released along with the decision, the FOMC reiterated that monetary policy makers will determine the “additional tightening size that is appropriate.”


In the previous meeting in June, the American central bank had decided on a 0.25 percentage point increase, reiterating at the time that monetary policy has a lag and that it would consider the cumulative effect of the tightening already done.

Latin America Business Development Veteran Leaves Glencore’s Oil Desk

Powell’s Speech

Now, investors are eagerly awaiting Federal Reserve Chairman Jerome Powell’s speech for clues about the next steps in monetary policy.

During the press conference, Powell will be asked if he expects another rate hike this year and if he agrees with the rate projections in the dot plot.


He will likely emphasize that Fed officials will “stay the course” until inflation is under control, said Lindsey Piegza, chief economist at Stifel Financial Corp.

“He wants to keep options open, and the last thing he wants is for the market to price in rate cuts until early 2024,” she said.

The Fed Chairman is also expected to be questioned about imminent challenges to U.S. growth, including the recent surge in energy prices, the prospect of a government shutdown in October, and the resumption of student loan payments.

-- With information from Bloomberg News


Read Also:

El Salvador’s Aggresive Gang Crackdown Achieves Safety Parity with Canada, Says Bukele