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The Federal Reserve carried on its tightening campaign Wednesday, raising interest rates by 75 basis points for its fourth consecutive aggressive hike.
But Fed Chair Jerome Powell signaled a potential shift in policy that favors hiking rates at a slower pace for a longer period of time.
"It will become appropriate to slow the pace of increases as we approach the level of interest rates that will be sufficiently restrictive to bring inflation down to our 2% goal," he said at a press conference Wednesday.
"So that time is coming, and it may come as soon as the next meeting or the one after that. No decision has been made," he added.
Some of Wall Street's most prominent voices have weighed in on the November Fed meeting. Here's how Scott Minerd, Mohamed El-Erian, and other top experts reacted.
Scott Minerd, Guggenheim Partners CIO:
"I wouldn't call today's Federal Open Market Committee decision/statement a pivot, but by acknowledging the need to wait for the lagged effects of 'cumulative tightening,' the Fed has opened the door to it," Minerd tweeted Wednesday.
"But they will still have to see it in the data," he added, noting policymakers will only shift to more gradual rate hikes once inflation starts to fall.
Mohamed El-Erian, economist and former PIMCO chief executive:
There are "lots of notables in Fed Chair Powell's remarks at his press conference including a shift in the balance of policy risk: from prior concerns of being too aggressive to the current worry of doing too little," El-Erian tweeted Wednesday.
The longtime Fed critic said that Powell's latest statement showed that the central bank is finally starting to understand the threat of inflation, even if curbing it requires consecutive aggressive rate hikes.
"Underpinning this is – finally – better appreciation of the inflation dynamics," he said.
Larry Summers, former Treasury Secretary:
Summers said Wednesday that Powell's statement would spark some market uncertainty, but that his commitment to hiking rates more gradually for a longer period would likely prove the right approach to taming soaring prices.
"I am not sure of the FOMC statement, which the market read as backing off inflation fighting," he tweeted. "But I thought chairman Powell framed the issues right and pointed towards appropriate policy in his press conference today."
Jan Hatzius, Goldman Sachs chief economist:
Powell's statement showed that he's aware the central bank may have previously hiked rates too quickly, according to Goldman Sachs.
Hatzius' team said in a research note published Wednesday that the Fed chair had signaled a potential change in strategy that might help it stave off a recession with more precise rate hikes.
"Today's meeting made us a bit less concerned about the risk that the Fed will unnecessarily overtighten enough to cause a recession next year, despite the hint at a higher peak funds rate," Goldman Sachs said.
Paul Donovan, UBS Global Wealth Management chief economist:
In contrast, Donovan criticized the Fed's approach, saying jumbo-sized rate hikes threaten the global economy, with Powell failing to consider that other central banks will have to also hike aggressively to keep up with a surging US dollar that foreign investors are buying to take advantage of higher yields.
"In the world's financial markets, US Federal Reserve chair Jay Powell is increasingly cast in the role of playground bully — looming over the prostrate form of the global economy and chanting 'hike, hike, hike' with malicious glee," he wrote in a Financial Times op-ed Wednesday. "US policy rates are rising relentlessly."
Jim Reid, Deutsche Bank managing director:
Reid expects the Fed's new "slower for longer" strategy to increase the risk of a recession, with Powell himself appearing to acknowledge it'll be difficult to achieve a soft landing.
Powell's remarks showed "the Fed had a ways to go until achieving an appropriately restrictive stance," Reid wrote in a Thursday note.
"The tighter for longer restrictive policy stance also had the Chair bring his economic outlook closer to Deutsche Bank's," he added. "[Powell] downgraded the Fed's prospects of achieving a soft landing, upgrading the probability he placed on a recession."
