US Fed meet begins today: Likely status quo on rates, but Street wants to know how long?
A majority of the economists see the central bank leaving interest rates unchanged at the end of the meeting, even though inflation remains higher and above the targeted 2%.
The consumer price index-based inflation in the US rose 3.7% from a year ago in August, primarily due to the spike in gas prices. This was up from a 3.2% annual increase in July.
Even Though the inflation has cooled off significantly from the peak and moved closer to the Fed’s 2% target, the recent rise in oil and gasoline prices pose upside risks to inflation.
During its previous policy meeting in July the Fed committee had said that it will continue to assess incoming data and its implications for monetary policy.
Indicating that price pressures remain a pain point even after a significant moderation from the peak, the Fed said it was watchful to inflation risks and was committed to bring it down to its target of 2% annual increase.
In the minutes of the Fed’s previous meeting too, the central bank hinted at interest rates staying higher for longer amid inflation risks.
According to the CME Fedwatch tool, 99% of the investors are expecting the Fed to leave the federal funds target range at 5.25-5.50%.
Given that the status quo has been largely factored into prices, the outlook for interest rate trajectory for the rest of 2023 is what will be closely tracked by investors across the globe on Wednesday.
“Markets expect the Fed to sound hawkish while pausing and indicate one more rate hike this year.
