Fed Holds Rates in June but Hints for Two More Hikes by End of 2023

The U.S. central bank left interest rates unchanged at the meeting on Wednesday, but signalled that there could be two small hikes by the end of this year.

The Federal Reserve maintained its policy rate at 5-5.25%, in line with expectations from the market. Fed Chair Jerome Powell described in a press conference after the meeting, stating that U.S. growth and the job market are holding up better than expected under the weight of the aggressive monetary policy tightening this past year.

The chairman noted that the pause was out of caution for the Fed to gather more information before deciding if rates are required to be raised again.

Investors saw some hints from the chairman’s statement as a signal for further rate hikes. The word choice such as “at this meeting” by Powell was seen as a strong hint that holding steady was just for this meeting, implying that more hikes are to come. The market believed there will be two more hikes for a total of half a percentage point by the end of this year as the Fed reacted to a stronger-than-expected economy and a slower decline in inflation.