WASHINGTON — At last week's meeting, the Federal Open Market Committee voted to keep the federal funds rate at 5-1/4%.
The committee said that the economy seems to be moderating, mainly because of the slowing housing market. However, one bank president voted against staying the course, preferring a 25 basis point rate hike.
"Readings on core inflation have been elevated, and the high levels of resource utilization and of the prices of energy and other commodities have the potential to sustain inflation pressures," the FOMC explained in its public statement. "However, inflation pressures seem likely to moderate over time, reflecting reduced impetus from energy prices, contained inflation expectations, and the cumulative effects of monetary policy actions and other factors restraining aggregate demand.
Recommended For You
"Nonetheless, the Committee judges that some inflation risks remain. The extent and timing of any additional firming that may be needed to address these risks will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information."
CUNA Economist Steve Rick commented, "It appears that the interest rate cycle has probably reached its peak and we'll probably start seeing a decline in the interest rate in March of next year." He said this is a positive for credit unions because it means their cost of funds, which is "tied somewhat to the Fed funds rate," will go down.
NAFCU Senior Economist Jeff Taylor differed, noting that the dissent for the second month in a row is an indicator that the FOMC may not be so confident the economy will slow quickly enough to stave off inflation. Basically, he said, "they're buying time" to see if the economy will slow to decrease the rate of core inflation that is still growing. "Eventually, I think they're going to run out of time and have to do another 25 basis points in the fourth quarter," Taylor predicted.
© 2025 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
