Fed does the expected thing

As expected, today's meeting of the FOMC ended with the Fed deciding to keep its Fed funds target range unchanged at 5.25-5.5 percent. The press release starts with a recitation of economic developments that might, in the abstract,  point to the need for higher rates, but then explains why the Fed is content for now to see whether its past tightening moves are enough to get inflation back to the 2 percent target.

The first paragraph, quoted here in full, would need very little amendment if the outcome of the meeting had in fact been another rate hike:

Recent indicators suggest that economic activity expanded at a strong pace in the third quarter. Job gains have moderated since earlier in the year but remain strong, and the unemployment rate has remained low. Inflation remains elevated.

However, the release then goes on to list the Committee's rationale(s) for keeping things unchanged for now.  These include:

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

and

In determining the extent of additional policy firming that 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.

The FOMC is of course quick to restate its ultimate goal: The Committee is strongly committed to returning inflation to its 2 percent objective. Market participants now seem to have taken on board the message that rates are likely to stay at current levels for much longer than was previously anticipated, with a full return to the 2 percent target not anticipated until 2026. Whether further rate hikes will be needed to meet that goal is still an open question, but today's announcement makes it clear that further upside surprises in growth or employment could yet push the FOMC in that direction.