Quiver Quantitative - The Federal Reserve is anticipated to hold off on any further interest rate hikes at the forthcoming FOMC meeting slated for September 19-20, marking the second such pause this year. This decision, influenced by a perceptible reduction in inflation rates, doesn't rule out the possibility of an increment as soon as November, considering the persistent inflationary pressures. Current rates are poised to remain within the bracket of 5.25% to 5.5%, a pinnacle not witnessed in 22 years. Federal Reserve Chairman Jerome Powell is scheduled to host a press briefing half an hour post the release of the committee's decisions and forecasts.
Amid lingering inflation concerns, which are yet to stabilize below the committee’s benchmark of 2%, Powell intimates a cautious approach before adjudging the ramifications of prior rate augmentations on the economic milieu. Consequently, Powell and the team are in no rush to declare a victory over inflation, maintaining an open stance on future rate adjustments. Analysts and industry experts anticipate that Powell would refrain from signaling an all-clear, considering the unstable nature of the prevailing economic variables.
As the financial world keenly watches for any hints from the Federal Open Market Committee (FOMC) regarding future moves, a divergence in opinion is evident among committee members. A faction of the committee, who advocate a dovish policy, are in favor of sustaining the current rates throughout the year, while another hawkish group is pushing for a potential increase to 5.6% or even higher. The expectations are leaning towards a median projection showcasing a single rate hike in 2023, but the exact outcome remains speculative. Furthermore, the impending meeting is likely to present the committee's inaugural economic forecasts for 2026 and revisions to their long-term interest rate predictions, potentially surpassing the June estimation of 2.5%.
The post-meeting statement is anticipated to mirror its July predecessor, with a strong inclination towards further hikes without establishing a definitive resolution. Despite a perceived moderation in economic growth, the labor market descriptions might undergo minor adjustments owing to the recent cooling period. New entrant to the committee, Governor Adriana Kugler, is expected to be a significant addition, representing the first Hispanic policymaker in the central bank. Powell's subsequent press conference is forecasted to revolve around the prospective rate hikes and his alignment with the dot plot predictions, emphasizing a steady strategy until the inflation situation stabilizes. The meeting is also expected to touch upon forthcoming hurdles to the US economic progression, including the surge in energy prices and potential governmental shutdown in October.
This article was originally published on Quiver Quantitative