Fed poised to hike rates as markets anticipate inflation endgame
By Howard Schneider
WASHINGTON (Reuters) -The Federal Reserve is expected to raise interest rates by a quarter of a percentage point on Wednesday, marking the 11th hike in the U.S. central bank's past 12 policy meetings and possibly a last move in its aggressive battle to tame inflation.
The increase, anticipated by investors with nearly a 100% probability, would raise the benchmark overnight interest rate to the 5.25%-5.50% range. That would bring it to roughly the highest level since the approach to the 2007-2009 financial crisis and recession.
There's little sense a similar collapse is on the horizon. Far from it, the economy is proving more resilient to rising interest rates than expected, with ongoing growth and an unemployment rate that is currently pinned at a low 3.6%.
In assessing where policy may move next, in fact, the Fed will be balancing whether the economy remains too strong to return a still-elevated rate of inflation to the central bank's 2% target against evidence that a process of «disinflation» may be underway that is likely to continue even without any further rate increases.
After a rapid series of rate hikes over the last year, with the central bank moving in unusually large three-quarters-of-a-percentage-point steps at one point, policymakers say they are now making meeting-by-meeting judgments based on incoming data, an approach meant to keep their options open and one likely to be emphasized by Fed Chair Jerome Powell in a press conference shortly after the 2 p.m. EDT (1800 GMT) release of the policy statement.
A key question, said Steve Englander, head of G10 FX research and North America macro strategy at Standard Chartered (OTC:SCBFF), is whether the Fed «puts more emphasis on
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