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WASHINGTON, Sept 19 - The U.S. Federal Reserve kicks off a two-day policy meeting on Tuesday with officials widely expected to keep interest rates on hold for now, but also flagging in new economic projections whether they feel rates still need to rise further before the end of the year.
From March 2022 through May 2023 the Fed raised rates at 10 successive meetings - by anywhere from a quarter to three quarters of a point - as it fought the worst rise of inflation since the early 1980s. The logic"is partly inertia, as Committee participants might not want to mess with what's working," said JP Morgan economist Michael Feroli.
'RISKS ARE SKEWED' Policymakers, and notably Powell, have also been reluctant to show any give in their inflation fight, even if it means higher interest rates than expected and greater risk to an economy that has produced more jobs and growth than anticipated given the rapid tightening of monetary policy.
The outcome of Wednesday's meeting may already involve a tricky communications shift, as the Fed manages the approach of what is likely the end of its rate increases - if policymakers do raise the policy rate again it would likely come at the November meeting - and the transition to the time next year when they will likely begin reducing interest rates as a way to stay in synch with lower inflation.
As of June, officials saw the policy rate falling a full percentage point next year, alongside declining inflation and a rising unemployment rate, an outlook markets will be parsing closely for any changes and what that says about the underlying strength of the economy.
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