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Special Report

Financial Markets Research Brief

September 2023

Fed Holds Rates Steady, While Taking
Note of Emerging Economic Risks

Fed opts for a rate hike hiatus. On September 20, the Federal Open Market Committee announced there would be no change in the federal funds rate, while the institution would continue to reduce securities holdings. This will maintain the current lower bound of 5.25 percent first set in July, and mark the second meeting in 2023 during which the Fed chose to forgo a rate increase. Labor market dynamics played a major role in the FOMC’s decision-making. Although labor demand still exceeds supply, job openings have declined as recruitment has tapered. Chairman Powell also reiterated the Fed’s open-ended, data-dependent stance at the meeting. This contrasts the language used during June’s pause, which explicitly referred to that decision as a skip, foreshadowing the increase in July. While FOMC projections imply another hike is possible, this is not an official goal, and, as of late September, Wall Street estimates the chance of a hold through year-end at over 60 percent.

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