The Federal Reserve is expected to raise interest rates on Wednesday and perhaps signal a break in its 14-month monetary tightening cycle as policymakers balance the need to slow inflation against a pressing array of risks, ranging from bank failures to possibility of a US debt default as early as next month.
Investors believe the US central bank will go ahead with a 25 percentage point hike in interest rates at the end of the policy meeting. The statement will be released at 15:00 (Brasilia time) and Fed Chairman Jerome Powell will speak to reporters half an hour later.
But the new statement and what Powell will say about it will have to reconcile a number of risks that have become more conflicting.
Inflation has come down only slowly, leaving some Fed officials unconvinced that the interest rate has risen enough to really bring it under control. However, the economy itself appears to be weakening, a trio of recent bank failures have raised concerns about broader problems in the financial sector, and the shaky nature of the debt limit talks between Congressional Republicans and the Democrat-controlled White House could spark a acute crisis if the US government is forced to stop paying its bills.
In March, 10 out of 18 Fed officials indicated they were likely ready to halt rate hikes after another hike, expected at this week’s meeting, took the Fed’s key rate from 5.00% to 5.00%. 25%.
Between this consensus and other problems that have escalated in the meantime, the Fed must at least open the door to the prospect that this hike is the last one in the current tightening cycle, without a future inflation surprise.
Source: Terra
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