At the Federal Open Market Committee (FOMC) meeting on the 1st, the Fed is expected to continue tightening monetary policy aimed at curbing inflation, while continuing to narrow down the range of interest rate hikes.
Federal Reserve Board (FRB) Chairman Jerome Powell, who will hold a press conference after the meeting, is expected to dismiss the speculation of a rate cut within the year, pointing out that there is no change in the possibility of further rate hikes.
The US Fed, which had raised interest rates by 0.75 percentage points for four consecutive meetings until November last year, slowed the pace of rate hikes to 0.5 percentage points in December. It is widely expected to compress it further to 0.25 percentage points this time around, with a target range of 4.5-4.75% for the federal funds rate.
Quarterly economic forecasts are not scheduled to be released, and the authorities will continue to work on fighting inflation through the FOMC statement to be released at 2:00 p.m. is likely to emphasize that the is not over yet.
“While both doves and hawks have repeatedly said policy rates are likely to remain at a peak for some time, the market is optimistic,” said Ellen Zentner, chief U.S. economist at Morgan Stanley. ‘s thinking is different,” he said.
Recent data from the US economy show signs of easing price pressures and slowing growth, suggesting that the Fed’s aggressive interest rate hikes are starting to take effect. However, as the labor market continues to be tight, the authorities may be under even greater pressure to continue the interest rate hike campaign or to keep interest rates on hold at a suppressive level for an extended period of time.
Officials have said in the past that raising the federal funds rate target above 5% and keeping it there would spread the effects of higher rates across the economy.
Morgan Stanley’s Zentner said that even after the Fed has stopped raising interest rates, if the Fed remains at a high level, real interest rates will become more constraining as inflation slows. explain that it can be maintained.
UBS Group Chief U.S. Economist Jonathan Pingle said the Fed’s quarterly economic forecasts released in December projected that the median target would be raised to 5.1%. He said one of the points of interest is whether the company will refer to it as an accurate reflection of the official’s outlook even at this time.
Recent price data show that inflation is decelerating at a faster pace than officials expected, and there may be clues as to what Fed Chairman Powell might say about it. Personal Consumption Expenditure (PCE) Price Index in December YoY５％It rose and slowed to the slowest growth since 2021, but is still well above the official target of 2%.
“They’re getting more and more confident that inflation is peaking,” Pingle said of officials, but said it “would be too early” to signal that a halt to rate hikes was imminent. ‘ said.
Financial conditions in the United States are the most accommodative since February last year. Investors speculate that the Fed will end rate hikes soon and cut rates later this year on the back of slowing inflation. can hinder
“The biggest mystery is how officials will react to the relative easing in financial conditions since the last meeting in December,” said Thomas Kosterg, senior U.S. economist at Pictet Wealth Management. . He expects further rate hikes in March and May. I personally can’t imagine it,” he said.
news-rsf-original-reference paywall">Original title:Fed to Slow Rate Hikes, Signal Work Not Over: Decision-Day Guide(excerpt)