As expected: unch'd.

In line with almost unanimous market expectations, the Federal Reserve kept its funds target range unchanged at 5.0-5.25 percent today, ending a ten-meeting-long sequence of rate hikes.  The tone of the press release can perhaps be best described as neutral, giving no real clues as to whether this is the end of the current tightening cycle or simply a pause. 

The Fed is careful to stress. more than once. its continuing commitment to restoring inflation to the 2 percent target: The Committee remains highly attentive to inflation risks, and later The Committee is strongly committed to returning inflation to its 2 percent objective.

At the same time, there are clear indications that the Fed is now confident that it has the luxury of waiting to see the full impact of the policy actions it has taken since early 2022: It offers several reasons for this:

Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain.......

Holding the target range steady at this meeting allows the Committee to assess additional information and its implications for monetary policy...... 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.

Inevitably, the release closes by noting that The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. That sentence, and much of the rest of the relatively short press release, is not new, but it somehow reads differently in the context of today's rate decision.

So what happens next?   Projections released alongside today's decision show that all but two FOMC members still see rates moving higher in the current cycle. Even so, it seems unlikely that the FOMC would have opted to keep rates unchanged today if it seriously felt that another rate hike would become necessary very soon, so the base assumption should probably be that this marks the start of a fairly lengthy pause.  

By the time of the next FOMC announcement on July 26, the Fed will have another month of data on both CPI and PPI;  both of these showed encouraging trends in the latest monthly data and both should benefit from a helpful base effect for at least one more month. There will also be another month of labor force data to consider. As always, the decision in July will depend on the data flow, but for now it seems reasonable to predict that if there is to be another rate hike, it won't happen until after Labor Day.