Taking a time out to consider the effect of prior rate increases, the FOMC left the fed funds target range at 5.00 percent to 5.25 percent but did not signal a further pause in the current rate hike cycle. The statement said,"Holding the target range steady at this meeting allows the Committee to assess additional information and its implications for monetary policy."

Elsewhere in the statement there was little alteration. The US economy"continued to expand" while"Inflation remains elevated." The FOMC remains"highly attentive" to inflation risks and"strongly committed to returning inflation to its 2 percent objective." The FOMC reiterated,"Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain."

The decision to pause is not necessarily the end of the tightening cycle. The summary of economic projections (SEP) shows that median forecast for the fed funds rate is up to 5.6 percent in June from 5.1 percent in March. This suggests two more 25-basis-point rate hikes or one 50-point hike in 2023. The forecasts for 2024 and 2025 were also revised higher. The June forecast points to rate cuts in 2024, but the fed funds rate is now expected to fall to 4.6 percent, up from 4.3 percent in March. In 2025, the fed funds rate is anticipated to fall to 3.4 percent according to the June forecast, up from 3.1 percent in the March forecast. At the very least, the forecasts point to less chance of a rate cut in 2023 and higher rates for longer in 2024 and 2025.

Some of the upward revisions in rates may reflect the sharply higher GDP forecast for 2023 which is now at up 1.0 percent after up 0.4 percent in March. The forecast for the unemployment rate was revised down to 4.1 percent in June from 4.5 percent in March. Median forecasts point to stronger growth and a tighter labor market than previously thought, both of which could help support higher rates without potentially triggering a recession. While the forecast for PCE inflation was little changed at 3.2 percent for June after 3.3 percent in March, the core PCE inflation forecast was revised up to 3.9 percent in June from 3.6 percent in the prior estimate. This echoes the FOMC statement's concerns that inflation remains elevated and points to a need for Fed policymakers to continue to work to bring it down through monetary policy.

However high core inflation remains, the Fed is not expected to raise rates at June's meeting. The prospect of a pause in fact was the takeaway of May's meeting which saw a dovish adjustment to guidance.

The FOMC meeting announcement is a policy statement issued at the conclusion of each meeting of the Federal Open Market Committee. It offers updates on economic conditions with special focus on the health of the labor market and the latest on inflation. It also updates the status of the federal funds target which is the FOMC's official policy interest rate. This rate is expressed within a range, such as 1.75 to 2.00 percent. The center of this range is the implied target. The higher this target, the more restrictive monetary policy becomes, the lower this target, the more accommodative policy becomes. Other policy tools are also discussed in the meeting announcement including updates on direct purchases of Treasuries and mortgage-backed securities. Debate is not offered in the statement, just the consensus view is expressed, though the statement does list the total committee vote and how each member voted.

The Fed determines interest rate policy at FOMC meetings. These occur roughly every six weeks and are the single most influential event for the markets. For weeks in advance, market participants speculate about the possibility of an interest rate change at these meetings. If the outcome is different from expectations, the impact on the markets can be dramatic and far-reaching.

The interest rate set by the Fed, the federal funds rate, serves as a benchmark for all other rates. A change in the fed funds rate, the lending rate banks charge each other for the use of overnight funds, translates directly through to all other interest rates from Treasury bonds to mortgage loans. It also changes the dynamics of competition for investor dollars. When bonds yield 5 percent, they will attract more money away from stocks than when they only yield 3 percent.

The level of interest rates affects the economy. Higher interest rates tend to slow economic activity; lower interest rates stimulate economic activity. Either way, interest rates influence the sales environment. In the consumer sector, fewer homes or cars will be purchased when interest rates rise. Furthermore, interest rate costs are a significant factor for many businesses, particularly for companies with high debt loads or who have to finance high inventory levels. This interest cost has a direct impact on corporate profits. The bottom line is that higher interest rates are bearish for the stock market, while lower interest rates are bullish.

The Fed also began quantitative easing during the past recession and, through direct purchases in the market, steadily increased its holdings of Treasuries and mortgage-back securities before pulling back from the program beginning in late 2017. Along with lowering its bond holdings, the Fed began to gradually raise its federal funds target until mid-2019 when, facing slowing global growth, it began to lower its target.

Frequency
Eight times a year.