Fed set to keep rates on hold, delay cuts in the near future
Federal Reserve officials are poised to keep interest rates steady for a sixth consecutive meeting and signal no plans for cuts in the near future after higher-than-expected inflation.
The Federal Open Market Committee will hold the target range for its benchmark rate at 5.25% to 5.5% — a two-decade high first reached in July — at the conclusion of its two-day policy meeting Wednesday. The rate decision, and possibly an announcement on the pace of its balance-sheet reduction program, will be released at 2 p.m. in Washington. Chair Jerome Powell will hold a press conference 30 minutes later.
Policymakers are reluctant to begin lowering borrowing costs until they’re certain inflation is closing in on 2%, the rate they see as appropriate for a healthy economy. While they had penciled in three 2024 rate cuts as recently as March, Powell is likely to indicate those plans are on hold and will depend on an improvement in inflation.
“The message will be wait-and-see and policy needs more time to work,” said Michael Gapen, head of US economics at Bank of America Corp. “The answer to stickier inflation is you just stay where you are for longer. ‘We’ll be on hold until the cows come home if we have to.’”
The tone of the post-meeting policy statement and press conference was likely signaled by Powell in an April 16 speech, in which the Fed chief said rates could be higher for longer and the central bank would keep policy restrictive “as long as needed.”
What Bloomberg Economics Says…
“We expect Powell to make a hawkish pivot at the April 30-May 1 meeting. At the minimum, he’ll likely indicate the median FOMC participant now expects ‘less’ cuts this year. In a more hawkish direction, he could hint at a chance of no cuts — or even
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