The Federal Reserve elected to forgo a rate hike on Wednesday for a second consecutive meeting, in a sign that officials are gauging the longer-term effects of tighter monetary policy and higher borrowing costs. The central bank has tapped the brakes since raising the fed funds rate in July to its highest level since 2001, part of an aggressive campaign to knock out the strongest inflationary pressures to hit the US economy in four decades. However, underlying inflation has cooled—the core PCE price index ticked lower to 3.7% year-over-year in September—and a run up in Treasury yields of late has sparked a rise in borrowing costs for mortgages, credit cards and other forms of lending. Higher interest rates for consumer and business loans are likely to further squeeze consumption, thus creating an economic downdraft that could negate future rate hikes.

In remarks delivered before this week's meeting, policymakers highlighted the impact that higher interest rates and tougher lending standards may have on the economy and inflation, which raised market expectations for the Fed to hold rates steady and await further data. The October jobs report on Friday is expected to show that hiring decelerated, with employers adding 175,000 jobs, coming off a blockbuster month of September that brought 336,000 new jobs. PGIM Fixed Income's new video discusses the latest decision and where the Fed may go from here.