Expectations for the decision of the US Federal Reserve on a new rise in interest rates

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The market expects the Fed to raise interest rates for the seventh consecutive time, but with an increase of 25 points, more moderate than in previous meetings

Expectations for the decision of the US Federal Reserve on a new rise in interest rates

Jerome Powell, headline from the Federal Reserve (Reuters)

The Federal Reservewill issue its monetary policy statement on Wednesday after a two-day meeting. Markets are mostly expecting the central bank to announce that it will accelerate the end of its pandemic-era bond purchases and signal a turn in its policy of raising interest rates to contain inflation.

The meeting will end at noon on Wednesday and the market expects the Fed to raise its interest rates for the seventh consecutive time, which currently sit in a range of 4.25 to 4.50%. Fed Chairman Jerome Powell will hold a press conference to explain the agency's decisions.

After several important hikes, of three-quarters of a percentage point and half a percentage point lately, the Fed should return to a smaller and usual increase as part of its tightening policy, of 25 basis points, they estimate specialists.

Raising the guideline rate by a quarter point is “prudent considering the moderation of inflation” and “weak activity figures” in the economy, summarized Steve Englander, head of US macroeconomics at Standard Chartered and a former Fed economist, in a note from analysis.

“I think it is time to slow down (of rate increases) without stopping it,” Christopher Waller, one of the governors of the fed.

Expectations for the decision of the US Federal Reserve on a new rise in interest rates

Fed Building , in Washington (Reuters)

“After Wednesday morning, business news will be left behind, erased by the Fed,” concluded Steve Sosnick, chief strategist at Interactive Brokers (IBKR). “I think the market is overly enthusiastic about the idea of ​​the Fed claiming victory as soon as (against inflation) and resuming its loose monetary policy,” leaving behind rate hikes or even lowering them by the end of the year, he added. Sosnick.

The increase in interest rates makes credit more expensive and thereby discourages consumption and investment, which push prices up.

The Fed's decision will be announced in a statement Wednesday at 2:00 p.m. local time (7:00 p.m. GMT) and then Fed Chairman Jerome Powell will hold a press conference.

< p class="paragraph">Inflation in December marked 5% at 12 months compared to 5.5% in the rolling year ending in November, according to the PCE index, which is the most followed by the Fed.

< p class="paragraph">The agency points to inflation of 2%, considered healthy for the economy.

The Fed tries to contain inflation without discouraging consumption or weaken the job market to a point where it risks a recession.

(With information from Reuters and AFP)

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