On Wednesday September 21, the Federal Reserve released its latest decision on interest rate policy in the United States. The committee left its target rate unchanged at 0.25% – 0.50%, a range which has been in effect since December 2015.
The most notable section of the statement issued at the Fed press conference was, however, not related to the lack of change in interest rates, but rather to the Fed’s expectations for the future. To quote the statement: “The case for an increase in the federal funds rate has strengthened.”
This language is in stark contrast to the words the Fed has used at previous policy meetings this year, which have generally not mentioned such hints for rate hikes pending. The Fed is clearly bracing the markets for a second rate hike, most likely at the December meeting, which would set a range for short-term interest rates between 0.50% – 0.75%.