The Federal Reserve made the widely expected move of leaving interest rates unchanged when it wrapped up its regularly scheduled two-day policy meeting on Wednesday. If there was any sort of surprise, it was that policymakers expect stronger economic growth to keep interest rates higher for longer through much of next year.

There was little doubt that the Federal Open Market Committee (FOMC) would once again pause in its campaign of interest rate increases on Wednesday after hiking in July. As expected, the central bank’s rate-setting group left the short-term federal funds rate unchanged at a target range of 5.25% to 5.5%. Interest rate traders assigned a 99% probability to just such an outcome, according to CME Group.

Clayton Allison, Portfolio Manager, Capital Investment Advisors (PCIA), said “I am not too surprised at the rate pause given moderation in shelter and softening in the labor market since the last decision. It’s worth noting, though, despite the pause, markets did not like that most of the FOMC members are signaling one more hike for the year. It looks like the market action is getting driven by the increased projections for rates in 2024 and 2025, so participants are having to acknowledge the fact that Fed is ready for their higher for longer environment.”