Rates remain unchanged, but additional hikes aren’t off the table

The U.S. Federal Reserve (the Fed) announced it’s holding the target range for the federal funds rate at 5.25% to 5.5% during the Federal Open Market Committee’s (FOMC) statement on November 1, 2023.

CIBC Capital Markets confirms resilience is the key word to describe the U.S. economy lately, as recent indicators suggest economic activity expanded in the third quarter (July to September). The US has seen a recent surge in consumer spending and job gains in the US labour market remain strong as the unemployment rate remains low.

The FOMC remains aware of inflation risks and maintained its data-dependent approach in the November 1 statement. This leaves the door open to further tightening and rate increases if need be — and there will likely be a need for an additional increase this year. CIBC Capital Markets expects the Fed to increase rates by 25 basis points (bps) during its next meeting in December.

Tighter financial and credit conditions for both households and businesses are likely going to weigh on economic activity, the labour market and the rate of inflation to some extent. An additional rate increase could help the Fed continue its fight against inflation in hopes of bringing the rate back to its target of 2%.

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