Though the Federal Open Market Committee meeting on Wednesday may provide insight into when the central bank may cut interest rates, do not anticipate any changes to monetary policy from the Federal Reserve.
The policy-setting committee of the Federal Reserve is expected to maintain the Fed Funds Rate at its current range of 5.25 to 5.50% when it concludes its meeting on Wednesday. It has remained there since last July in an effort to keep inflation under control, marking a 23-year high.
Rates Aren’t Likely to Budge
The financial markets would be severely shocked if the Fed decided to either raise interest rates in order to further curb inflation or decrease them in order to boost the economy. The CME Group’s Fedwatch Tool, which predicts rate movements based on fed funds futures trading data, indicates that traders are primarily pricing in a September rate cut at the earliest.
Significant changes to the interest rate would also go against the recent public declarations made by central bank officials, who have indicated that they are prepared to keep the fed funds rate higher for an extended period of time.
Members of the Federal Reserve policy committee have stated that they will not consider lowering their key interest rate, which affects borrowing costs on various loans, until they are confident that inflation is firmly on a path down to an annual rate of 2%.
Fears that price increases are speeding up may have subsided in light of recent reports showing inflation is gradually declining. It is unlikely, nevertheless, to have persuaded decision-makers that inflation is defeated, putting the Fed in a holding pattern.
All Eyes Will Be On Projections, Powell
The FOMC members’ quarterly economic projections, particularly for the path of the fed funds rate, are expected to attract greater attention now that the rate movement—or lack thereof—is essentially inevitable.