The Federal Reserve will leave interest rates unchanged on Wednesday for the first time since the US central bank began a historically aggressive round of monetary policy tightening in March 2022.
But don’t call it a change or a break.
By the end of their meeting on Wednesday, Fed officials may signal that more rate hikes are yet to come as they assess how the economy is performing, whether the financial system remains stable and whether inflation continues to fall.
“We probably need a little more tightening, but it’s not clear how much,” said Blerina Uruci, chief US economist at the fixed income division of T. Rowe Price Associates, noting that despite the strength of recent reports on the employment and inflation, a “differentiated” data reading showed that both could weaken.
“When there’s so much uncertainty, it makes sense to proceed with caution,” he said.
The Fed will release its monetary policy statement and new quarterly economic forecasts at 3 PM ET. Fed Chairman Jerome Powell will hold a press conference half an hour later.
A sense of caution about the economy competing with current inflation concerns has brought the Fed to this point, on the verge of what analysts are calling a “hawkish rebound.”
While it is likely they will not opt for higher borrowing costs after 10 consecutive hikes that brought the key interest rate into the current range of 5.00% to 5.25%, Fed officials must show at the same time , both in language and projections, that one or perhaps two more increases of 0.25 percentage points by the end of 2023 are still needed.
Source: Terra
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