Rates high enough

 

Fed Officials Debate Whether They Have Raised Rates Enough

The Federal Reserve is likely to leave its benchmark interest rate unchanged this week at a 22-year high while keeping open the possibility of another rate hike to fight inflation.

Officials, whose two-day policy meeting concludes Wednesday, could raise rates again in December or next year if the economy doesn’t cool as they expect and inflation picks up again after slowing since June.

They also will likely consider whether the recent swift run-up in Treasury yields could effectively substitute for another rate increase.

The central bank releases its policy statement Wednesday at 2 p.m. Eastern time. Fed Chair Jerome Powell will answer questions from reporters at 2:30 p.m. Here’s what to watch for:

Wait and see, but for how long?

The Fed’s anticipated decision would mark the second consecutive meeting in which it hasn’t raised rates, underscoring its wait-and-see stance in the inflation fight. Officials have raised rates since March 2022 at the fastest pace in four decades. Their most recent increase, in July, brought the benchmark federal-funds rate to a range between 5.25% and 5.5%.

The big questions for the Fed on Wednesday are likely to be addressed in Powell’s news conference. One will center on what officials want to see. He’s likely to say they hope for continued slowdown in inflation and signs that economic activity and hiring are cooling after brisk growth during the July-through-September period.

Another will be what it would take for officials to conclude they are moving in the right or wrong direction: The former would allow officials to hold rates steady at coming meetings, while the latter could lead them to hike again.