Federal Reserve Expected to Keep Interest Rate Steady at 22-Year High
As Wall Street anxiously awaits the Federal Reserve’s announcement on Wednesday, the likelihood of interest rates remaining steady at their 22-year high looks strong. This would mark the third time in a row that the Central Bank has opted to keep the key interest rate unchanged.
In addition to the interest rate decision, the Fed is anticipated to release new economic projections, which are expected to show inflation cooling at a faster pace than previously estimated, and the potential for a rate cut next year.
Fed Chair Jerome Powell, who is expected to reiterate his stance on keeping more hikes on the table, has already attempted to quell conversations around rate cuts. “Having come so far so quickly, the [Fed] is moving forward carefully, as the risks of under- and over-tightening are becoming more balanced,” Powell said during a discussion in Atlanta.
There are mixed views among economists and market analysts regarding the likelihood of rate cuts next year, with some suggesting that the Fed could begin cutting rates in March, while others remain more skeptical about the possibility of imminent cuts.
The Fed’s preferred measure of inflation, as reflected in the Consumer Price Index, has shown some improvement, but remains slightly above the Fed’s target of 2%. Additionally, economic growth has slowed from the rapid pace seen in the third quarter, and the job market has also displayed signs of a slowdown.
Amidst these economic indicators, the fate of the US economy remains uncertain, with the possibility of a soft landing, where inflation slows without a sharp rise in unemployment, still hanging in the balance. As investors, analysts, and economists eagerly await the Fed’s announcement, it’s clear that the Fed’s decision will have considerable implications for the short-term outlook of the economy.