Federal Reserve Maintains Interest Rate, Continues Reducing Securities Holdings, Cautious Approach Ahead

The Federal Reserve kept its key short-term interest rate unchanged on Nov.1 for a second straight time, but left the door open to further rate hikes if inflation pressures should accelerate in the months ahead.

Roughly 20 months into the Fed’s aggressive tightening of monetary policy, Fed Chair Jerome Powell said it remained unclear whether overall financial conditions were yet restrictive enough to tame inflation that he still considers to be far above the central bank’s 2 percent target.

“We’re not confident that we haven’t, we’re not confident that we have” reached that sufficiently restrictive plateau, Mr. Powell told reporters. “Inflation has been coming down, but it’s still running well above our 2 percent target … A few months of good data are only the beginning of what it will take to build confidence.”

Annual inflation, based on the Fed’s preferred measure, was 3.4 percent in September for the third month in a row. Excluding volatile food and energy costs, it was 3.7 percent, little changed from August.