US Fed meeting decision today: PIMCO warns market is underestimating risk of US recession and rate hikes
US Federal Reserve will opt to maintain its current interest rates as it announces its policy decision later today. The two-day Federal Open Market Committee (FOMC) meeting began yesterday (September 19) and its outcome is due later today (September 20). The US Fed has been raising rates since March 2022 and this could be the second time since then that the Fed may maintain a pause on interest rate hikes.
Markets across the globe will closely watch what the US Fed Chairman Jerome Powell says about inflation and the US economy. The market might have discounted the possibility of a pause by the Fed in September. So, the market may not react to the move.
However, the Fed Chair's commentary on the inflation trajectory and growth will be closely observed by the markets. V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services believes the Fed will likely hold rates this time but the tone of the Fed commentary will likely be a bit hawkish since inflation continues to be high despite some easing. He anticipates one more rate hike of 25bps in the next meet and a hold thereafter.
"The Fed always responds to incoming data. However, the current trend indicates the possibility of a rate cut only by the second quarter of the next year (Q2CY24)," said Vijayakumar. He pointed out that the markets have already discounted this expected scenario.
The positive response of the US market and consequently other markets, too, is in response to the US economy’s soft landing scenario. "Markets will remain stable so long as this soft landing scenario holds," he said. Read more: How will the US Fed interest rate decision impact the stock market? Disclaimer:The views and recommendations above are those of individual analysts,
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