The Federal Reserve interest rate, known as the federal funds rate, fed funds rate, or FOMC rate, is the interest rate at which banks and credit unions borrow from and lend to each other, and is the benchmark for nearly all interest rates. It’s determined by the Federal Reserve and can be changed at any time.

Interest rates hold steady following Dec. 12-13 Federal Reserve meeting

The Federal Reserve has opted to hold interest rates steady for the third meeting in a row. The target range for the federal funds rate will remain 5.25% to 5.5%.

Economists had anticipated a pause on interest rate hikes due to a number of factors, including cooling inflation. However, as the Fed stated in its post-meeting notes, “The Committee would be prepared to adjust the stance of monetary policy as appropriate.”

Analysis of the Federal Reserve’s decision on Dec. 13, 2023

The Federal Reserve made the decision to keep its benchmark interest rate unchanged at its Dec. 12 – Dec. 13 policy meeting. The central bank raised interest rates 11 times between March of 2022 and July of 2023.

At its late September meeting, the Fed made the decision to hit pause on interest rate hikes. The Oct. 31 – Nov. 1 meeting marked the second consecutive pause, and the most recent meeting was the third in a row where interest rates held steady.

The Fed has long been committed to an annual inflation rate of 2% in the long run. It’s this rate, the central bank feels, that’s most conducive to economic stability.

In November, the Consumer Price Index, which measures changes in the cost of consumer goods and services, rose 3.1% on an annual basis.

The Fed noted in its meeting statement that inflation has eased but remains elevated. It also affirmed its intent to restore annual inflation to 2% over time.

However, the Fed felt that pausing rate hikes was the more prudent course of action given where inflation is sitting. The central bank said it will continue to assess economic data and its impact on monetary policy.

The Fed also made it clear that it’s open to additional interest rate hikes should inflation rise or get stuck at a level above the Fed’s target. The Fed needs to strike a balance between bringing inflation back down to 2% and potentially upending the economy by driving up the cost of consumer borrowing to an unreasonable degree. Although broad economic activity expanded during the third quarter of the year, recent indicators suggest that that growth has begun to slow, which allowed the Fed to keep rates steady.

Changes to the federal funds rate impact consumers because they can influence the interest rates on credit cards, loans, and savings accounts to varying degrees.

When is the next Fed rate hike?

The central bank has one more opportunity to raise rates before 2023 comes to a close. However, some experts believe that the Fed may be done with interest rate hikes – period.

“The fact that they left rates unchanged for the second time in a row suggests the Fed might leave rates unchanged in December,” said Peter Cardillo, chief market economist at Spartan Capital Securities. “And if they do, that means the Fed is done.”

How high will U.S. interest rates get?

According to the Fed’s September economic projections, interest rates were expected to go as high as 5.6% by the end of the year. However, that may not happen if the Fed holds rates steady at their current level.

When is the next Fed meeting?

The next Federal Reserve meeting in 2023 is scheduled for December 12 to December 13, 2023. The FOMC meeting spans two days so Federal Reserve committee members can discuss the economic impacts of adjustments to the Federal interest rate. See the 2023-2024 tentative remaining FOMC meeting schedules»

What changes are expected at the next Fed meeting?

Fed Chair Jerome Powell did suggest the possibility of one more interest rate hike if the economy shows signs of improvement and continues to push up prices.