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September 01, 2020 1:28pm
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Fed pauses rate hikes for second time this year, but hints at another increase

The Federal Reserve paused its interest-rate hike campaign on Wednesday for the second time this year amid signs that inflation is continuing to moderate.

The Federal Reserve on Wednesday held interest rates steady for the second time this year, pausing its tightening campaign to assess how the economy is faring in the face of higher borrowing costs. 

The widely expected decision left interest rates unchanged at a range of 5.25% to 5.5%, the highest level since 2001. But policymakers also left the door open to an additional rate increase this year.

Policymakers have raised interest rates sharply over the past year, approving 11 rate increases in the hopes of crushing inflation and cooling the economy. In the span of just one year, interest rates surged from near zero to above 5%, the fastest pace of tightening since the 1980s. 

Hiking interest rates tends to create higher rates on consumer and business loans, which then slows the economy by forcing employers to cut back on spending. Higher rates have helped push the average rate on 30-year mortgages above 7% for the first time in years. Borrowing costs for everything from home equity lines of credit, auto loans and credit cards have also spiked.

Despite the rapid increase in rates, the economy has proven surprisingly resilient. 

The labor market is continuing to chug along at a healthy pace, with employers adding 187,000 new workers in August. Job openings remain high, although the unemployment rate recently ticked up to 3.8% from 3.5%.


This is a developing story. Please check back for updates.

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