Instant Reaction: Fed Announcement, September 20, 2023

The Federal Reserve is rightly on pause and is looking for more data before determining its next course on interest rates. With fewer job openings, slowing job gains, and softening core consumer price inflation, the Fed must consider the potential economic damage arising from any future rate hikes. Moreover, commercial real estate has come under stress from higher interest rates, which will further negatively impact community banks due to their large exposure to the sector.

Therefore, the Fed needs to wait and not raise rates. Possible interest rate cuts then need to be considered once inflation is fully under control.