Saturday, September 30, 2023

The market expects the Fed to leave interest rates unchanged

The labor market finds balance USA The Inflation is increasing but in a moderate way: These two ingredients make the market expect that the Federal Reserve At their meeting this week, key interest rates will remain unchanged.

The consensus on the outcome of the meeting was “largely”. Monetary Policy Committee (FOMC) According to Oxford Economics, the US Federal Reserve meeting will take place on Tuesday and Wednesday.

Interest rates are currently in a range of 5.25% to 5.50% after 11 consecutive hikes in an attempt to curb inflation. interest rate increase means Making loans more expensive and discouraging consumption and investments, which put upward pressure on prices.

The Inflation Data: Key for the Fed

In August the inflation According to the Consumer Price Index (CPI) released on Wednesday, the consumer price index rose for the second month in a row, reaching 3.7% in 12 months.

But since “core inflation (NDLR, which excludes more volatile prices such as energy and food) has performed better, we do not expect this data to have a major impact on the Fed’s decision,” Oxford noted.

The President of the Federal Reserve, Jerome Powell, will hold his usual press conference on Wednesday after releasing the committee’s decision and his updated economic forecasts. You are expected to keep the door open new tariff increases.

“The Fed has already completed its adjustment cycle,” but its managers will be careful to say so to avoid “markets integrating this idea” and taking it for granted, Gregory Daco, chief economist at EY, told AFP. There is a risk that financing conditions will loosen “prematurely,” which could drive prices up again. rising prices, Daco appreciated.

USA: Further economic data provides clues

In matters Employment, In a market closely watched by the Fed, the situation appears to be balanced after two years Shortage of workers. Thanks to new workers entering the market, the unemployment rate passed its historic low and stood at 3.8% in August. That should help moderate inflation.

Furthermore, the consumption the engine of the economy, is showing some signs of weakness, with “modest” spending in the summer, according to the “Beige Book,” a survey conducted by the Fed.

American families are wiping out theirs savings According to the Fed, the funds accumulated during the pandemic are therefore “more reliant on credit to finance their spending.”

Loans cost more and this leads to some purchases being postponed or simply discarded. Additionally, millions of Americans will return in October to get their money back Coursework after a two and a half year break due to Covid. He European Central Bank (ECB) On Thursday it raised interest rates by 25 basis points to 4%, the highest since 1999.

Nation World News Desk
Nation World News Desk
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