The Federal Reserve held off on raising rates in their October 2018 meeting, but left the door open for future increases. This decision to not raise rates yet is good news for the economy overall but could mean more hikes in the future.
The Fed has been keeping an eye on the economy to make sure it remains vibrant and consumers have the right amount of access to credit. They believe that the current rate, which is at 2.25%, is sufficient and any hikes could prove to be too much of a risk. This decision to leave the rate unchanged also means that the banks will keep borrowing costs low, which should spur more consumer spending.
At the same time, the Fed noted that it expects inflation to stay at the 2% target which means that any hikes will be gradual. They also indicated that there is still room for more tightening as of now, meaning that they could raise rates in the next meeting if the economy warrants it.
The Fed has also been monitoring the activities of President Trump, his policies, and their impact on the economy. So far, the effects have been positive but if the President introduces policies that could damage the economy, then the Fed could raise rates in order to stave off any economic damage.
It’s clear that the Fed is watching the economy very closely and will be ready to act accordingly. In the meantime, they are taking a cautious approach to raising rates, which should mean that the economy continues to move in the right direction.
