Full recap: Fed leaves rates unchanged, Powell discusses December decision

Federal Reserve Chair Powell said the strength of consumer and small business's finances may have been "underestimated" as spending remains strong.

"We may have underestimated the balance sheet strength of households and small businesses, and that may be part of it," he said during the press conference.

While he said the country will eventually see pre-pandemic savings levels, that point may not be here yet.

— Alex Harring

The major averages turned sharply higher after 3 p.m. as traders took an upbeat read off of the Federal Reserve's latest decision.

At 3:09 p.m. ET, the S&P 500 was up by about 1%, while the Dow Jones Industrial Average gained 0.7%. The Nasdaq Composite was the outperformer of the three indexes, up 1.3%.

-Darla Mercado

The sharp run-up in Treasury yields is not causing the Fed to change its approach to reducing the size of its bond holdings.

Chair Jerome Powell said Wednesday that the central bank's move to allow up to $95 billion a month in Treasurys and mortgage-backed securities to roll off each month hasn't been anything more than a small factor in the yield rise.

"The committee is not considering changing the pace of its balance sheet runoff. It's not something we're talking about considering," he said.

—Jeff Cox

Despite a resilient economy as the Federal Reserve has tightened monetary policy, Chair Jerome Powell says taming inflation will most likely require a slowdown in growth and dampening in the labor market.

"I still believe, and my colleagues for the most part still believe, that it is likely to be true … that we will need to see some slower growth and some softening in the labor market to fully restore price stability," Powell said.

— Brian Evans

Federal Reserve Chair Jerome Powell said the central bank hasn't made any decisions yet for its December meeting — and even if it chooses to pause rates for the third consecutive meeting, that doesn't mean it would be more difficult for it to start raising rates again.

"The idea that it would be difficult to raise again after stopping for a meeting or two is just not right," Powell said. "The Committee will always do what it thinks is appropriate at the time."

— Hakyung Kim

Fed Chair Powell stressed that the central bank hasn't begun considering a rate cut, and it won't until inflation is brought under control.

"The fact is the committee is not thinking about rate cuts right now at all. We're not talking about rate cuts," Powell said. "We're still very focused on the first question, which is 'have we achieved a stance of monetary policy that's sufficiently restrictive to bring inflation down to 2% over time, sustainably?' That is the question we're focusing on."

— Yun Li

Fed Chairman Jerome Powell said the rating-setting committee hasn't determined on its policy decisions for its future meetings.

"We haven't made any decisions about future meetings," Powell said. "That is the way we're going to be going into these future meetings, is to be you know, just determining the extent of any additional further policy tightening that may be appropriate to return inflation at 2% over time."

There's one more meeting left this year, which is scheduled for Dec. 12 and Dec. 13.

— Yun Li

The major averages pulled back on some of its earlier gains after Federal Reserve Chair Jerome Powell said that the central bank hasn't yet reached a decision on how it will proceed at its December meeting.

Stocks remained positive, even as earlier gains were moderated. The S&P 500 was last up 0.3%, the Nasdaq Composite was up 0.5%, and the Dow was up 0.1%.

-Darla Mercado

The Federal Reserve is not declaring victory on inflation even though recent readings have fallen below 4%, Powell said.

"A few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal. The process of getting inflation sustainably down to 2% has a long way to go," Powell said.

— Jesse Pound

After the Fed's latest policy announcement, Whitney Watson of Goldman Sachs Asset Management thinks rates will stay at these levels for a while.

"The economy's resilience has not stalled labor market rebalancing or revived wage and price pressures, suggesting disinflation will progress and indicating that the Fed will likely keep its policy unchanged into 2024," said the firm's CIO of fixed income and liquidity solutions.

"Nevertheless, there are risks in both directions. The rise inflation expectations, owing to higher gas prices, combined with strong economic activity, preserves the prospect of another rate hike," Watson said. "Conversely, a more pronounced economic slowdown caused by the growing impact of higher interest rates might accelerate the timeline for transitioning to rate cuts."

— Fred Imbert

The Fed statement's reference to tighter financial conditions could be a key takeaway from Wednesday's report. Long-term interest rates have risen in recent months even though the Fed's hikes have been on pause, which may make the Fed more comfortable holding the benchmark rate at its current level.

"The statement's emphasis on financial conditions weighing on the economy is potentially a signal that the Fed has minimal appetite to raise rates further," said Seema Shah, chief global strategist at Principal Asset Management. "But with the economy still so hot and inflation deceleration potentially hitting a road bump, an overly dovish approach from Powell may risk a resurgence in inflation pressures. Powell has a careful balancing act ahead of him – not just today but for the coming months."

— Jesse Pound

Policymakers made several tweaks to their November statement.

Updates to the text include acknowledging the "strong" pace of economic expansion in the third quarter. The central bank also noted that job gains have "moderated since earlier in the year."

Read more about the November updates to the Fed's statement.

-Darla Mercado, Alex Harring

In its decision to keep interest rates steady once more, the Federal Reserve upgraded its stance on the economy.

The Fed's post-meeting statement said that "economic activity expanded at a strong pace in the third quarter." Back in September, policymakers said the economy had expanded at a "solid pace."

This latest decision from the central bank arrives on the heels of a report showing that U.S. gross domestic product expanded at a 4.9% annualized rate, surpassing expectations.

Read more about the Fed's decision here.

-Darla Mercado, Jeff Cox

The central bank left interest rates unchanged for a second consecutive time at the conclusion of its November meeting. That keeps the fed funds' target rate at a range of 5.25% to 5.5%.

Stocks remained positive, with the S&P 500 up 0.4%, the Nasdaq Composite up 0.7% and the Dow up 0.3%.

Treasury yields slipped, with the 10-year yield sliding to 4.795%, off about 8 basis points.

-Darla Mercado

Stocks had modest gains – but were off their session highs – in the minutes leading up to the Federal Reserve's 2 p.m. ET decision.

The S&P 500 was up 0.4%, while the Nasdaq Composite was higher by 0.6%. The Dow Jones Industrial Average was up about 0.3%.

The yield on the 10-year Treasury was 4.804%, down by 7 basis points. The 2-year Treasury yield was 5.016%, off by about 5 basis points.

-Darla Mercado

Though policymakers are expected to skip a rate hike Wednesday, investors shouldn't bet on the Federal Reserve ending its policy-tightening campaign, said Jeffrey Lacker, former president of the Richmond Fed.

"There's nothing in it for him [Chair Jerome Powell] to take interest rate hikes off the table and signal a definitive pause for a long time," he said on CNBC's "Squawk on the Street." "He's going to keep them on the table. They're still far from getting done bringing inflation under control."

Lacker noted that wage rate gains don't seem to be coming down in a material fashion and that recession risks have receded in the past six to 12 months.

"It looks like 3.5% or 4% is right around where inflation is now, so we have a ways to go is the point," he said.

-Darla Mercado

Central bank officials are expected to hold steady on policy Wednesday, but the main event will be Federal Reserve Chair Jerome Powell's upcoming press conference.

Fed funds futures pricing suggests a roughly 98% likelihood that the benchmark rate will remain within the central bank's target range of 5.25% to 5.5%, according to the CME FedWatch Tool.

The Fed's rate decision arrives nearly a week after a report showed that the U.S. gross domestic product grew at a 4.9% annual pace – surpassing expectations. At the same time, Treasury yields have remained high and the rate on the 10-year note popped over 5% in October.

These developments make Powell's upcoming press conference at 2:30 p.m. ET even more important. Investors will be looking for additional context around the Fed's latest decision, as well as insight into the path forward for rate policy.

Read more about Powell's announcement here.

-Darla Mercado, Jeff Cox