Introduction on interest rate decision
The Federal Reserve is set to announce its latest interest rate decision at their upcoming meeting. Economists are predicting that the Fed will increase the policy interest rate by 25 basis points. However, it’s important to note that the Fed will work to ensure that the market doesn’t interpret this move as a signal that rate increases are finished.
Rate Hike Predicted:
Despite recent good news on inflation and being one step closer to the end of the rate-hike cycle, it’s likely too soon for the Fed to stop raising rates and too soon to signal a stop is imminent, according to Jonathan Pingle, economist at UBS. Paul Ashworth, chief North America economist at Capital Economics, adds that there could be one last “hawkish sting in the tail” from the Fed.
Fed Chairman’s Role:
Fed Chairman Jerome Powell will be thinking carefully about how not to send an inadvertently “dovish” signal. A “dovish” stance by the Fed would indicate a willingness to keep rates low or even lower them, while a “hawkish” stance would indicate a desire to raise rates further. Powell will hold a press conference at 2:30 p.m. Eastern on Wednesday, a half-hour after the Federal Open Market Committee announced its Interest rate decision.
Market Expectations:
The markets seem to be anticipating interest rate decision as a quarter-point rate hike, which would push up the Fed’s benchmark rate to a range of 4.5%-4.75%. However, investors who trade in fed funds futures markets now expect the top end of the Fed’s benchmark rate to be 4.5% at the end of this year and 2.9% at the end of 2024, according to Ashworth.
Conclusion:
The Fed’s interest rate decision to raise interest rates is not a certainty, as many economists believe that the Fed may pause its rate hikes due to the weaker economic outlook. However, Fed Chairman Jerome Powell is likely to continue pressing the theme that the Fed is not done raising rates, and will highlight concern over service inflation and wages. The Fed will be laser-focused on inflation despite the weaker economic outlook.
Commentary is more important than Rate Hike decision
The Federal Reserve’s upcoming interest rate decision meeting is expected to result in a quarter-point increase in the policy interest rate, pushing the benchmark rate to a range of 4.5%-4.75%. However, economists suggest that the Fed’s commentary on future rate increases may be more significant than the actual rate hike.
Hawkish or Dovish?
Many economists predict that Fed Chairman Jerome Powell will take a hawkish stance, meaning that he will signal that the Fed is not done raising rates. This is in contrast to a dovish stance, which would indicate that the Fed is approaching the end of their rate-hike cycle.
Powell is expected to hold a press conference after the Federal Open Market Committee announces its rate decision. He is likely to press the theme that he doesn’t think the Fed is done raising rates and highlight concern over service inflation and wages.
More rate hikes to come?
After the quarter-point increase, some experts predict that the Fed will raise rates by two more quarter percentage points in March and May before pausing. This would put the peak of the benchmark rate up to a range of 5%-5.25%.
However, others believe that the Fed will only hike one more time in March before pausing. This is due to the recent low inflation data and weaker economic outlook.
Poetic views on Interest rate decision
Title: "Rate Hike Riddle" The Fed will raise, but not too high 25 basis points, a cautious sigh Markets celebrate, but not too fast For the future may not be as aghast Chairman Powell thinks with care To not send signals too rare Inflation subsiding, but not done Hawks may still sting, before we're done Rates were close to zero last year But now they're climbing, far from clear Will they pause, or will they rise Only time will tell, before our eyes Investors trade, with futures in mind But what the end holds, is hard to find The Fed walks a tightrope, with caution in hand For the future of our economy, we all stand.
In conclusion, the Fed’s upcoming interest rate decision meeting is expected to result in a quarter-point increase in the policy interest rate. However, the Fed’s commentary on future rate increases may be more significant than the actual rate hike. Fed Chairman Jerome Powell is expected to take a hawkish stance and signal that the Fed is not done raising rates, despite the recent low inflation data and weaker economic outlook.