The Fed Announces No Change in Rates

The Fed just announced that it is *not* changing rates this month, and the Federal Funds Rate remains at 5-5-1/4 percent.

No surprises today.https://t.co/EcQS0kkuv2

— Justin Wolfers (@JustinWolfers) June 14, 2023

The most important part of the statement: It's not quite a promise, just a very pregnant hint that the Fed anticipates raising rates at the next meeting.

(This sort of language -- justifying the specifics of *this meeting* -- is relatively rare in Fed statements.) pic.twitter.com/gGJZY01cMF

— Justin Wolfers (@JustinWolfers) June 14, 2023

There really are no other notable changes to this Fed statement: pic.twitter.com/vUpnjTbpUE

— Justin Wolfers (@JustinWolfers) June 14, 2023

Worth noting for the Recessionista's: The Fed saying "that economic activity has continued to expand" is an explicit claim that the economy (still!!!) is not in recession.

No matter how hard you wish it into being, there's still no recession to see here. Move along. pic.twitter.com/a5ZYW6nPzE

— Justin Wolfers (@JustinWolfers) June 14, 2023

The Fed also released its latest forecasts for the economy: https://t.co/Cz8GXXTc7i

It has marked up economic growth *substantially* for this year, suggesting that it sees the economy as gliding in for the soft landing it hoped for. These numbers no long look recessionary. pic.twitter.com/bAoBrvJfFn

— Justin Wolfers (@JustinWolfers) June 14, 2023

Here's the real news in these projections: The Fed now sees rates as being higher, for longer, than it did in March. That's quite striking, given the markets had bet that the Fed would keep rates below those March projections! pic.twitter.com/QEZYJEnwAb

— Justin Wolfers (@JustinWolfers) June 14, 2023

A majority of the committee expect to raise rates by another 0.5% by the end of the year. (Likely in two moves, each of a quarter point.) pic.twitter.com/OR7lUsYomA

— Justin Wolfers (@JustinWolfers) June 14, 2023

It's the Fed v. the Market on interest rate projections.

Fed is projecting rates to hit 5-1/2 percent or more by the end of the year. The markets only assign a small probability to that happening. pic.twitter.com/pbs6FmiMRc

— Justin Wolfers (@JustinWolfers) June 14, 2023

Bottom line: The Fed paused, but it's a hawkish pause, as its hawkish signal about future rates will likely cause an effective monetary tightening as short-medium run yields will rise.

— Justin Wolfers (@JustinWolfers) June 14, 2023