Federal Reserve policy-makers at the end of their two-day meeting may well signal more rate increases are still to come once they take time to assess how the economy is evolving
The Federal Reserve is expected to leave interest rates unchanged on Wednesday for the first time since the U.S. central bank kicked off a historically aggressive round of monetary policy tightening in March of 2022.Policy-makers at the end of their two-day meeting may well signal more rate increases are still to come once they take time to assess how the economy is evolving, whether the financial system remains stable, and if inflation is continuing to fall.
While likely to forego an increase in borrowing costs after 10 consecutive hikes that have pushed the benchmark overnight interest rate to the current 5.00 per cent-5.25 per cent range, Fed policy-makers at the same time are expected to show both in their language and projections that one or perhaps two more quarter-percentage-point hikes will still be needed by the end of 2023.
Inflation is declining only slowly, with some aspects of it proving more persistent than anticipated. The closely watched Personal Consumption Expenditures Price Index excluding food and energy has not improved much this year, and as of April was increasing at a 4.7 per cent annual rate, more than double the Fed’s 2 per cent target.
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