Fed’s Rate Decision and Powell’s Insights: What You Need to Know

On Wednesday, November 1, the U.S. Federal Reserve decided to keep interest rates unchanged at the conclusion of its policy meetings. This marks the second consecutive meeting where the central bank has chosen not to raise interest rates during its current tightening monetary policy cycle.

During the subsequent press conference, Fed Chairman Jerome Powell highlighted the recent indicators that demonstrated robust economic activity in the third quarter, including moderate job gains, a low unemployment rate and elevated inflation. He also mentioned that the Committee views the U.S. banking system as stable. However, Powell acknowledged that tightening financial conditions might impact the economy, employment and inflation, introducing uncertainty about the extent of these effects. As in previous meetings, he reiterated the Committee’s objectives of achieving maximum employment and 2% inflation in the long run, maintaining the federal funds rate target range at 5.25% to 5.5%. The Committee will weigh various factors when deciding on future monetary policy adjustments, including the cumulative impact of past policy changes, economic and financial developments and their commitment to achieving 2% inflation. They will also continue to monitor economic indicators and make policy adjustments as necessary to meet their goals, considering labor market conditions, inflation and international developments.

Key Highlights of the Press Conference:

  • Financial conditions are deteriorating for Americans, with higher borrowing costs freezing the housing market.
  • The Fed does not anticipate a near-future recession.
  • The Fed has yet to make plans to accelerate the balance sheet runoff.
  • The Fed remains uncertain whether current policy is restrictive enough to meet employment and price targets.
  • The economy has displayed remarkable resilience.
  • The Fed is closely observing the impact of past rate hikes, recognizing the time lags on how monetary policy affects economic activity and inflation.
  • Rate cuts are not currently under consideration.

After the release of the Fed’s policy statement and press conference, U.S. stocks traded higher, while U.S. Treasury yields fell, indicating optimism about the likelihood of further rate increases. The question remains: How will the government fund current deficits and rollover existing debt over the next three years with rates at current levels?

All in all, there was very little new in the statement from the committee and the Chairman’s subsequent news conference.

More details on the Fed’s recent decision to maintain interest rates can be found in the official press release, available through this link. Additionally, you can watch a replay of the comments from Powell’s corresponding press conference here. As always, if you have any questions about how this rate pause may impact your portfolio, please do not hesitate to contact us.

Important Information:

Warren Gerow is an independent investment wealth consultant to Sightline Wealth Management.

Sightline Wealth Management LP (“Sightline”) is an investment dealer and is a member of the Investment Industry Regulatory Organization of Canada (IIROC) and the Canadian Investor Protection Fund (CIPF). Sightline provides management and investment advisory services to high-net-worth individuals and institutional investors.

Sightline Wealth Management LP is a wholly owned subsidiary of Ninepoint Financial Group Inc. (“NFG Inc.”). NFG Inc. is also the parent company of Ninepoint Partners LP, it is an investment fund manager and advisor and exempt market dealer. By virtue of the same parent company, Sightline is affiliated with Ninepoint Partners LP. Information and/or materials contained herein is for information purposes only and does not constitute an offer to sell or solicitation to purchase securities of any issuer or any portfolio managed by Sightline Wealth Management or Ninepoint Partners, including Ninepoint managed funds.

The opinions and information contained in this article are those of Sightline Wealth Management (“Sightline”) as of the date of this article and are subject to change without notice. Sightline endeavors to ensure that the content has been compiled from sources that we believe to be reliable. The information is not meant to be used as the primary basis of investment decisions and should not be constructed as advice. Each investor should obtain independent advice before making any investment decisions.

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