Fed’s interest rate pause

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Federal Reserve Chairman Jerome Powell is sending a message to investors: The Fed’s benchmark short-term interest rate will likely stay low for a long time. The Fed has cut its key rate three times this year to a range of just 1.5% to 1.75%. And the word from Powell is that the rate will likely remain unchanged for now: Though he’s signaled that the Fed won’t further ease credit unless the economy deteriorates, he’s also set a high bar for any rate hikes. Powell said at a news conference last month that

there would have to be a “really substantial move up in inflation” for the Fed to consider raising rates. In the past, the Fed has boosted rates to try to avert an acceleration in inflation. And in testimony to Congress last week, the chairman said, “I think the new normal now is lower interest rates, lower inflation and probably lower growth.” That leaves the Fed’s benchmark rate at a historically low level, particularly with the unemployment rate at just 3.6%. The last time unemployment was below 4%, the Fed’s key rate was 6.5%.

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