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US central bank pauses interest rate hikes, signals two more increases likely in 2023 to fight inflation

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2 years ago

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After its sharpest flurry of interest rate hikes in four decades, the Federal Reserve held its key rate steady Wednesday but signalled two more increases are likely this year as officials continue to battle high inflation. That’s more projected hikes than financial markets and many economists anticipated. The decision leaves the benchmark rate at a range of 5% to 5.25%. It marks the first meeting at which the central bank hasn’t raised its federal funds rate since January 2022. Fed policymakers estimate they’ll push up the key rate by another half percentage point to a range of 5.5% to 5.75% in 2023, according to their median forecast. Financial markets and many economists expected the Fed to forecast just one more quarter point hike in July. That still would have been higher than the peak rate Fed officials predicted in March. By next year, however, the central bank expects to cut rates to 4.6% amid a weak economy and lower inflation.

“Holding the target range steady at this meeting allows the (Fed) to assess additional information and its implications for monetary policy,” the Fed said in a statement after a two-day meeting. The central bank added that it will determine “the extent of additional policy firming that may be appropriate” to lower inflation to the Fed’s 2% target based on the lags with which its rate hikes affect the economy, inflation and economic and financial developments. Inflation is running at 4.4%, according to the Fed’s preferred measure. The Fed’s decision to stand pat is set to provide a reprieve to consumers who have been socked with steady increases in rates for credit cards, adjustable-rate mortgages and other loans. Yet Americans, especially seniors, have benefited from the hikes by finally reaping higher bank savings yields after years of meagre returns.

Two more quarter point bumps are possible because officials expect faster growth and more persistent inflation than they previously forecast, potentially providing more reason to nudge rates higher. Officials expect their preferred measure of annual inflation to decline from 4.4% in April to 3.2% by year-end, below the March estimate of 3.3%, according to their’ median forecast. But a core measure that strips out volatile food and energy items and that the Fed follows more closely is expected to close out the year at 3.9%, above from the prior 3.6% estimate. The economy is expected to grow a modest 1% in 2023, more rapidly than the previous 0.4% projection, and 1.1% next year. And the 3.7% unemployment rate is forecast to rise to 4.1% by the end of the year, below the 4.5% previously forecast. After lifting rates at 10 straight meetings since March 2022 – by a total 5 percentage points — Fed officials have been split over whether to pause Wednesday or continue to push rates higher.

Last month, Fed Chair Jerome Powell suggested there was a good chance they would take a break to assess the delayed effects of a hiking campaign that most forecasters believe will cause a mild recession this year. Powell also said deposit runs that sparked the collapse of three regional banks have toughened lending standards and could further ding growth, leaving the Fed less work to do. But he said the Fed’s actions would depend on how the economy evolves. A report Tuesday revealed that another inflation measure – the consumer price index—showed a significant slowdown in May to 4% annually from 4.9% in April and a 40-year high of 9.1% last June. But a core measure that strips out volatile food and energy items advanced sharply from April, keeping the yearly rise elevated at 5.3%.

Also, employers added a booming 339,000 jobs in May. Annual wage growth ticked down from 4.4% to 4.3% but that’s still historically high and could continue to fuel inflation as employers pass higher labor costs to consumers. Consumer spending, which makes up 70% of economic activity, also has been robust as households rely on pandemic era savings to offset high borrowing costs and inflation. The persistence of inflation has led some Fed policymakers to call Wednesday’s decision to stand pat a “skip” rather than a “pause,” noting a July increase was a good bet. Others have noted the biggest impacts from the Fed’s rate increases so far have yet to be felt. They also expect inflation to fall substantially closer to the Fed’s 2% goal by the end of the year as rent increases slow. They believe the Fed should stand down to avoid a recession. No. 

During the pandemic, households accumulated about $2.5 trillion in excess savings from hunkering down at home and trillions of dollars in federal stimulus checks aimed at keeping workers afloat through layoffs and business closures. As a result, Americans have a big cushion of savings to help them weather high inflation and interest rates. They’ve whittled down much of that extra cash but about $1.5 trillion still remains, according to Moody’s Analytics. Consumers also still have lots of pent-up demand to travel, go to ballgames and dine out now that the health crisis has waned. So while consumption has weakened, rising just 1% annualised at the end of last year, it bounced back and grew 3.8% in the first three months of the year. Also, both households and businesses have historically low amounts of debt, Moody’s says, and so they’re not weighed down by high monthly debt service payments.

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Economy

Nigeria champions African-Arab trade to boost agribusiness, industrial growth

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December 5, 2025

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The Arab Africa Trade Bridges (AATB) Program and the Federal Republic of Nigeria formalized a partnership with the signing of the AATB Membership Agreement, officially welcoming Nigeria as the Program’s newest member country. The signing ceremony took place in Abuja on the sidelines of the 5th AATB Board of Governors Meeting, hosted by the Federal Government of Nigeria.

The Membership Agreement was signed by Eng. Adeeb Y. Al Aama, the CEO of the International Islamic Trade Finance Corporation (ITFC) and AATB Program Secretary General, and H.E. Mr. Wale Edun, Minister of Finance and Coordinating Minister of the Economy, Federal Republic of Nigeria. The Agreement will provide a strategic and operational framework to support Nigeria’s efforts in trade competitiveness, promote export diversification, strengthen priority value chains, and advance capacity-building efforts in line with national development priorities. Areas of collaboration will include trade promotion, agribusiness modernization, SME development, businessmen missions, trade facilitation, logistics efficiency, and digital trade readiness.

The Honourable Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, called for deeper trade collaboration between African and Arab nations, stressing the importance of value-added Agribusiness and industrial partnerships for regional growth. Speaking in Abuja at the Agribusiness Matchmaking Forum ahead of the AATB Board of Governors Meeting, the Minister said the shifting global economy makes it essential for African and Arab nations to rely more on regional cooperation, investment and shared markets.

He highlighted projections showing Arab-Africa trade could grow by more than US$37 billion in the next three years and urged partners to prioritize value addition rather than raw commodity exports. He noted that Nigeria’s growing industrial base and upcoming National Single Window reforms will support efficiency, investment and private-sector expansion.

“This is a moment to turn opportunity into action”, he said. “By working together, we can build stronger value chains, create jobs and support prosperity across our regions”, Edun emphasized. “As African and Arab nations embark on this journey of deeper trade collaboration, the potential for growth and development is vast. With a shared vision and commitment to value-added partnerships, we can unlock new opportunities, drive economic growth, and create a brighter future for our people.”

Speaking during the event, Eng. Adeeb Y. Al Aama, Chief Executive Officer of ITFC and Secretary General of the AATB Program, stated: “We are pleased to welcome Nigeria to be part of the AATB Program. Nigeria stands as one of Africa’s most dynamic and resilient economies in Africa, with a rapidly expanding private sector and strong potential across agribusiness, energy, manufacturing, and digital industries. Through this Membership Agreement, we look forward to collaborating closely with Nigerian institutions to strengthen value chains, expand regional market access, enhance trade finance and investment opportunities, and support the country’s development priorities.”

The signing of this Agreement underscores AATB’s continued engagement with African countries and its evolving portfolio of programs supporting trade and investment. In recent years, AATB has worked on initiatives across agribusiness, textiles, logistics, digital trade, export readiness under the AfCFTA framework, and other regional initiatives such as the Common African Agro-Parks (CAAPs) Programme.

With Nigeria’s accession, the AATB Program extends it’s presence in the region and adds a key partner working toward advancing trade-led development and fostering inclusive economic growth.

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FEC approves 2026–2028 MTEF, projects N34.33trn revenue 

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December 4, 2025

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Federal Executive Council (FEC) has approved the 2026–2028 Medium-Term Expenditure Framework (MTEF), a key fiscal document that outlines Nigeria’s revenue expectations, macroeconomic assumptions, and spending priorities for the next three years. The approval followed Wednesday’s FEC meeting presided over by President Bola Tinubu at the State House, Abuja. The Minister of Budget and Economic Planning, Senator Atiku Bagudu made this known after the meeting.

The Minister said the Federal Government is projecting a total revenue inflow of N34.33 trillion in 2026, including N4.98 trillion expected from government-owned enterprises. Bagudu said that the projected revenue is N6.55 trillion lower than earlier estimates, adding that federal allocations are expected to drop by about N9.4 trillion, representing a 16% decline compared to the 2025 budget.

He said that statutory transfers are expected to amount to about N3 trillion within the same fiscal year. On macroeconomic assumptions, FEC adopted an oil production benchmark of 2.6 million barrels per day (mbpd) for 2026, although a more conservative 1.8 mbpd will be used for budgeting purposes. An oil price benchmark of $64 per barrel and an exchange rate of N1,512 per dollar were also approved.

Bagudu said the exchange rate assumption reflects projections tied to economic and political developments ahead of the 2027 general elections. He said the exchange rate assumption took into account the fiscal outlook ahead of the 2027 general elections.

The minister said that all the parameters were based on macroeconomic analysis by the Budget Office and other relevant agencies. Bagudu said FEC also reviewed comments from cabinet members before approving the Medium-Term Fiscal Expenditure Ceiling (MFTEC), which sets expenditure limits. Earlier, the Senate approved the external borrowing plan of $21.5 billion presented by President Tinubu for consideration The loans, according to the Senate, were part of the MTEF and Fiscal Strategy Paper (FSP) for the 2025 budget.

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Economy

CBN hikes interest on treasury Bills above inflation rate

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December 4, 2025

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The spot rate on Nigerian Treasury bills has been increased by 146 basis points by the Central Bank of Nigeria (CBN) following tight subscription levels at the main auction on Wednesday. The spot rate on Treasury bills with one-year maturity has now surpassed Nigeria’s 16.05% inflation by 145 basis points following a recent decision to keep the policy rate at 27%. 

The Apex Bank came to the primary market with N700 billion Treasury bills offer size across standard tenors, including 91-day, 182-day and 364 day maturities. Details from the auction results showed that demand settled slightly above the total offers as investors began to seek higher returns on naira assets despite disinflation.

Total subscription came in at about N775 billion versus N700 billion offers floated at the main auction. The results showed rising appetite for duration as investors parked about 90% of their bids on Nigerian Treasury bills with 364 days maturity. The CBN opened N100 billion worth of 91 days bills for subscription, but the offer received underwhelming bids totalling N44.17 billion.

The CBN allotted N42.80 billion for the short-term instrument at the spot rate of 15.30%, the same as the previous auction. Total demand for 182 days Nigerian Treasury bills settled at N33.38 billion as against N150 billion that the authority pushed out for subscription. The CBN raised N30.36 billion from 182 days bills allotted to investors at the spot rate of 15.50%, the same as the previous auction.

Investors staked N697.29 billion on N450 billion in 364-day Treasury bills that was offered for subscription. The CBN raised N636.46 billion from the longest tenor at the spot rate of 17.50%, up from 16.04% at the previous auction.

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