Fed Raises Benchmark Rate After June Pause
The decision by the Federal Open Market Committee (FOMC) to raise the Fed’s benchmark interest rate was announced on Wednesday, July 26th after a brief pause in June. According to the FOMC news release, the target range was increased 25 basis points to 5-1/4 to 5-1/2 percent as the committee continues efforts to achieve maximum employment and inflation rate of 2% over the longer run. Indications that the Fed’s move is gradually working, according to the July news release by the Bureau of Labor Statistics (BLS), the all-items index increased 3.0% for the 12 months ending June 2023— the smallest 12-month increase since the 2.6% increase in the period ending March 2021; and down from an all-items index increase high of 9.1% in June 2022. As part of the decision-making process related to the “extent of additional policy firming,” the FOMC will “take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments,” as well as adjusting their stance on monetary policy if risks emerge that could impede the attainment of the FOMC’s goals.