US Fed expected to pause rate hikes despite higher inflation
US Federal Reserve is widely expected to hold interest rates steady on Wednesday after a summer of mixed economic data, while leaving the door open to another hike if needed.
The Fed has raised interest rates 11 times over the last 18 months, lifting its key lending rate to a level not seen for 22 years as it tackles inflation still stubbornly above its long-term target of two percent.
After falling sharply over the last year, inflation has ticked up again in recent months due to a spike in energy costs, keeping up the pressure on the Fed.
But analysts and traders still broadly expect the US central bank to hold rates steady on September 19-20 in order to give policymakers more time to assess the health of the world's largest economy.
«We think the Fed is done with its tightening cycle,» EY Chief Economist Gregory Daco told AFP.
«That view has not changed over the past couple of months.»
«After raising rates in July, we expect the Fed to follow through on strong pre-meeting signals and hold rates steady,» Deutsche Bank economists wrote in a note to clients on Friday.
The rate-setting Federal Open Market Committee (FOMC) now finds itself in a difficult situation as it seeks to address inflation through interest rate hikes while avoiding a recession, a feat that economists call a soft landing.
Recent economic data showing strong economic growth in the first half of the year, inflation trending downward, and a softening jobs market suggests the Fed may just be able to pull it off.
«I think, in general, the economy is doing relatively well, but we are seeing signs that there is an economic slowdown underway,» said Daco from EY.
Analysts at Goldman Sachs recently cut their forecast for a recession in the United States from 20
