June Fed Meeting: Here is what you should know

The Federal Reserve (Fed) opted not to raise the federal funds rate at the June 2023 Federal Open Market Committee (FOMC) meeting, keeping the federal funds rate at 5.00%-5.25% and maintaining this policy rate at its highest level in sixteen years. The decision received unanimous support from FOMC voting members, just like the previous seven meetings since July last year.

This is the first pause in the Fed's current cycle of rate hikes, but it suggests that there may be two more rate hikes later this year. Ten consecutive rate hikes by the central bank since it began the current tightening cycle in March 2022.

The updated dot plot shows that two-thirds of Fed officials expect at least two more rate hikes by the end of the year, with a peak rate increase expected to rise by 50 basis points. Compared to the dot plot released in March, the Fed's policymakers have higher expectations for the peak rate, which means more hawkishness.

Inflation
Fed Chair Jerome Powell stated the Fed is strongly committed to bringing inflation down to its 2% target.

Monetary Policy
[Before] The committee decided to raise the target range for the federal funds rate to 5%-5.25%
[After] The federal funds target rate remains in a target range of 5%-5.25%.

Economic Activity
[Before] The economy expanded at a moderate pace in the first quarter.
[After] Recent indicators show that the economy continued to expand at a moderate pace

Rate Outlook
[Before] The committee will closely monitor upcoming information and assess its impact on monetary policy.
[After] Holding the target range steady allows the Committee to assess additional information and its implications for monetary policy.

In the economic forecast, Fed officials significantly raised their US GDP growth expectations for this year, predicting a 1.0% growth rate in 2023, more than twice the expected growth rate of 0.4% in March.

When the FOMC decides to raise interest rates, it signals that it wants to slow down economic growth and keep inflation in check.
Conversely, when the FOMC lowers interest rates, it tries to stimulate economic activity and encourage spending and investment.

However, it is important to note that the Federal Reserve Interest Rate Decision is just one of many factors that can impact the financial markets. When making investment decisions, you should always consider your investment goals and risk tolerance.

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