Fed Statement Signals Interest Rate Increases Could Pause

The Fed raised the target range for the federal funds rate another 25bps earlier today but signaled that it may have come to the end of its rate increases (at least temporarily) in its related statement. The signals are made visible by the accompanying marked version which highlights changes in the current statement from the prior. Every word in these statements is carefully considered and therefore the changes are market signals. Specifically, I take note of the change in wording from 'The Committee anticipates that some additional policy firming may be appropriate...' to 'In determining the extent to which additional policy firming may be appropriate...'. I also note the deletion of the text 'In determining the extent of future increases in the target range...'. These changes could be read to mean that the Fed's signal has shifted from 'expect more increases' to 'we are not committed to raising rates at the next meeting'.

Marked 2023.5.3 FOMC Statement.pdf

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