After 10 consecutive interest rate increases since March 2022, the most rapid in almost four decades, last week the US central bank decided to pause and left interest rates unchanged, at between 5 and 5.25 percent, the highest level in 16 years. Three reasons were offered by Federal Reserve Chairman Jerome Powell to explain the decision. During last week’s press conference, held at the conclusion of the Open Market Committee meeting, Chairman Powell mentioned, “how far we have come in tightening policy, the uncertain lags with which monetary policy affects the economy, and potential headwinds from credit tightening.” https://www.federalreserve.gov/mediacenter/files/FOMCpresconf20230614.pdf
However, Chairman Powell also informed that almost all participants in last week’s meeting expected “it will be appropriate to raise interest rates somewhat further by the end of the year.”
The markets reacted positively to the pause and some analysts indicating that this may be the start of a bull market, because last Thursday the S&P 500 index, pulled by the stocks of a few big, high-tech companies, rose above the 20 percent fall of October 12, 2022.
But this may be premature. As Jeff Sommer said in The New York Times (06/18/23), “Its’s not clear what the trend of the market will be for the next month or year.” Additionally, depending on the data, the central bank can still increase interest rates as early as its next meeting of July 25-26.
