The Federal Reserve held tight leaving its key overnight interest rate at 5.25%. The Fed gave no hint whether it would be changing interest rates anytime soon. Many economists expected the Fed to allude when it might start cutting rates. Instead, the Fed held open the possibility that it might increase rates if inflation does not moderate. It also expressed concern regarding the slowing housing market. The Fed described the housing slowdown as "substantial". This is stronger language than the Fed has used before.
The Fed is talking tough to keep a lid on inflation in hopes that it will not have to act tough and raise rates again. The stock market pulled back today (Tuesday December 12th), finishing slightly lower as investors grappled with the Fed's economic assessment and worries about accelerating inflation.
Friday’s release of November’s consumer price data will give us an indication of the Fed’s success at taming inflation. The Bloomberg poll predicts a 0.2 % increase, after food and energy items are removed. The increase for October was 0.1 %.
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