Live updates: Fed decision May 2023

One major change in Wednesday’s Fed statement is the omission of a key phrase that in prior meetings was seen as a sign that the central bank would keep hiking.

“The Committee anticipates that some additional policy firming may be appropriate,” the March statement said.

Instead, the new statement says this:

“In determining the extent to which additional policy firming may be appropriate to return inflation to 2 percent over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”

— Jesse Pound

The central bank raised interest rates by a quarter of a percentage point, a move that was broadly expected by the market.

The increase takes the fed funds rate to a target range of 5% to 5.25%.

It was a unanimous decision by the Federal Open Market Committee.

Read more here.

–Darla Mercado

Stocks ticked higher as the Federal Reserve’s 2 p.m. ET rate decision announcement approached.

As of about 1:45 p.m., the S&P 500 gained 0.3%, and the Nasdaq Composite added 0.5%. The Dow Jones Industrial Average ticked higher by 0.1%.

Bond yields were lower, with the rate on the 10-year Treasury down about 6 basis points to 3.37%. The rate on the 2-year Treasury was 3.92%, down 5 basis points.

Oil prices fell. West Texas Intermediate crude futures fell nearly 4%, and Brent futures slipped 3.6%.

–Darla Mercado

Investors are awaiting the central bank’s next steps, and they could be rewarded if this interest rate hike is the last one in the Federal Reserve’s tightening cycle.

An analysis by CNBC Pro found that the stock market gets a boost one month to 12 months following the end of the Fed’s hiking cycle. The S&P 500 averaged an 8% gain and 21% return in the 3 months and 12 months following the final rate hike in a series.

Read more here.

–Darla Mercado, Brian Evans

The market is all but certain that the Federal Reserve will push forward a 25-basis point rate hike this afternoon, bringing its benchmark funds rate to 5% to 5.25%.

The real question that’s bedeviling investors now is whether the central bank will indicate an end to its policy tightening or will it leave the door open for more interest rate increases to cool the economy.

A multitude of factors will weigh into the policy-setting Federal Open Market Committee’s next steps. Inflation has been on a cooling trend, with the March consumer price index rising 5% from a year ago – but it doesn’t seem to be slowing at a pace that would appease the Fed. Economic growth is also showing signs of slowing. April’s jobs report looms ahead, due out on Friday.

The recent trouble in the regional bank space, including First Republic’s failure and subsequent takeover by JPMorgan, could also factor into the decision.   

This means what the Fed says in its statement with respect to forward guidance – and what Chair Jerome Powell details in his upcoming presser – are even more important this time.

Read more on what’s ahead for the Fed here.

–Darla Mercado, Jeff Cox