https://sputnikglobe.com/20230614/us-fed-expected-to-hit-pause-on-rate-hikes-but-what-will-come-next--1111140058.html
US Fed Expected to Hit Pause on Rate Hikes, But What Will Come Next?
US Fed Expected to Hit Pause on Rate Hikes, But What Will Come Next?
Sputnik International
The US Federal Reserve is anticipated to hit the pause button on its interest rate hikes on Wednesday.
2023-06-14T13:48+0000
2023-06-14T13:48+0000
2023-06-14T13:48+0000
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The US Federal Reserve has been on a relentless interest rate hike marathon throughout the past 15 months, but after its policy meeting today, it is anticipated to hit the pause button.If this happens, will it be just a “June surprise,” as some analysts have already dubbed it, could it extend further into summer, or will it lead up to a full stop? These are the questions policymakers are expected to answer. What we do know at the moment is that the Fed's decision on interest rates, along with the central bankers' fresh economic forecasts will be made public at 2 p.m. in Washington. Some 30 minutes later, Jerome H. Powell, chair of the Federal Reserve of the United States, is scheduled to hold a press conference.Skipping or Stopping?The last time the Federal Reserve announced an interest rate raise - its tenth rate since the coronavirus pandemic ended - was in early May. At the time, the Fed added a quarter point to bring US rates to a peak of 5.25% from the 0.25% high they stood at three years ago.However, it was added that its Federal Open Market Committee (FOMC) will closely monitor incoming information and assess the implications for monetary policy.At the time, Fed Chair Jerome Powell indicated that a pause might be in the pipeline, saying:But even if the interest hikes are put on hold, with rates kept steady within the 5%-5.25% range, the FOMC committee will possibly indicate that it will not shut the door entirely on further hikes, whether in July or September, US analysts believe.A set of factors may reportedly impact the FOMC committee decision. These are: Economists of Wall Street are cited as forecasting a pause on interest rate hikes this time around, while those at Citigroup Inc., and LH Meyer/Monetary Policy Analytics have betted on a June hike, nevertheless.How is the US Economy Shaping Up?It's a mixed picture, judging by recent data. As part of its most aggressive tightening campaign in decades, the US central bank increased interest rates 5 percentage points in just slightly more than a year in a bid to tamp high inflation. Inflation slowed in May, however. The latest report by the US Bureau of Labor Statistics (BLS) showed that the United States is experiencing its lowest rate of inflation since March 2021. The Consumer Price Index (CPI) for May 2023 increased just 0.1% for the month. This brought its annual level down to 4% from 4.9% in April. Some might say that supports the case for Fed officials to give it a miss this time around. However, core inflation rose 0.4% on the month and remained up 5.3% from a year ago. Furthermore, experts clarify that months may be needed for the effects of interest rate changes to become fully reflected in the economy. Accordingly, even after a current assessment of data, there remains the risk that the Federal Reserve might "overdo it" with its rate hikes, slowing growth by more than needed to tame inflation.Federal Reserve Chairman Jerome Powell is expected to be conflicted between the urge to control inflation and wanting to get the economy growing again post-COVID-19 lockdown, and amid fallout from the energy crisis caused by sanctions on Russia, analysts previously told Sputnik. Sure, the US government managed to dodge a debt default with its last-minute debt ceiling deal, however its economy could face "stagflation" - stagnating economic growth combined with rampant inflation, economists underscored. The latest report by the US Bureau of Labor Statistics (BLS) contained downward revisions of earlier estimates for wages, average working hours per employee, productivity, and gross domestic product (GDP) growth. Over the past week, gross domestic product data for the first quarter showed a 1.1% growth on the year versus the 2.6% in the fourth quarter of 2022.Furthermore, the US national unemployment rate, albeit at a historically low 3.7%, is known to rise after interest rates are increased, besides carrying the risk of triggering a recession, which many top financiers anticipate later this year.Amid expectations of the Fed's policy announcements, a group of ten lawmakers called on the central bank officials to stop monetary tightening, warning that it was fraught with the "potential to throw millions of Americans out of work."There will be a measure of dissent regarding the interest rate decision at the Federal Open Market Committee meeting, believe around 40% of cited US economists. They singled out several "hawks," like Dallas Fed President Lorie Logan and Governor Christopher Waller, and Minneapolis Fed President Neel Kashkari, all purportedly arguing against a pause amid concerns that progress on curbing inflation has stalled.Economists believe that the FOMC statement on Wednesday may note that it will be keeping rates unchanged “for now” or “at this meeting,” hinting at further cuts looming ahead.
https://sputnikglobe.com/20230606/us-in-cardboard-box-recession-may-see-inflation-drop-in-6-months---top-economist-1110967939.html
https://sputnikglobe.com/20230613/economists-expect-fed-to-halt-rate-hikes-after-us-reports-40-inflation-lowest-since-march-2021-1111127565.html
https://sputnikglobe.com/20230606/us-job-figures-foreshadow-looming-economic-stagflation-crisis-1110943087.html
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US Fed Expected to Hit Pause on Rate Hikes, But What Will Come Next?
The US Federal Reserve is set to announce whether it will again raise interest rates on Wednesday against the backdrop of inflation still more than twice the central bank’s goal, and warnings that the economy is facing the possibility of "stagflation," despite having dodged the debt default bullet thanks to a hammered-out debt ceiling agreement.
The US Federal Reserve has been on a relentless interest rate hike marathon throughout the past 15 months, but after its policy meeting today, it is
anticipated to hit the pause button.
If this happens, will it be just a “June surprise,” as some analysts have already dubbed it, could it extend further into summer, or will it lead up to a full stop? These are the questions policymakers are expected to answer. What we do know at the moment is that the Fed's decision on interest rates, along with the central bankers' fresh economic forecasts will be made public at 2 p.m. in Washington. Some 30 minutes later, Jerome H. Powell, chair of the Federal Reserve of the United States, is scheduled to hold a press conference.
The last time the Federal Reserve announced an interest rate raise - its tenth rate since the coronavirus pandemic ended - was in early May. At the time, the Fed
added a quarter point to bring US rates to a peak of 5.25% from the 0.25% high they stood at three years ago.
"The Committee decided to raise the target range for the federal funds rate to 5 to 5-1/4 percent," the Fed said in a statement.
However, it was added that its Federal Open Market Committee (FOMC) will closely monitor incoming information and assess the implications for monetary policy.
At the time, Fed Chair Jerome Powell indicated that a pause might be in the pipeline, saying:
"We’ve come a long way in policy tightening and the stance of policy is restrictive and we face uncertainty about its lagged effects and about the extent of credit tightening from recent banking stresses. Having come this far, we can afford to look at the data and the evolving outlook to make careful assessments,” he said.
But even if the interest hikes are put on hold, with rates kept steady within the 5%-5.25% range, the FOMC committee will possibly indicate that it will not shut the door entirely on further hikes, whether in July or September, US analysts believe.
“This will be one of the trickier press conferences for Chair Powell, who I think will be aiming to keep market probability of a July hike reasonably high,” Dean Maki, chief economist at Point72 was quoted as saying in a media report.
A set of factors may reportedly impact the FOMC committee decision. These are:
An evaluation of the effect of earlier rate hikes on the economy.
The swathe of recent banking failures and how they have impacted credit conditions.
Inflation, which remains more than double the Central bank’s goal of 2 percent.
Economists of Wall Street are cited as forecasting a pause on interest rate hikes this time around, while those at Citigroup Inc., and LH Meyer/Monetary Policy Analytics have betted on a June hike, nevertheless.
How is the US Economy Shaping Up?
It's
a mixed picture, judging by recent data. As part of its most aggressive tightening campaign in decades, the US central bank increased interest rates 5 percentage points in just slightly more than a year in a bid to tamp high inflation. Inflation slowed in May, however. The
latest report by the US Bureau of Labor Statistics (BLS) showed that the United States is experiencing its lowest rate of inflation since March 2021. The Consumer Price Index (CPI) for May 2023 increased just 0.1% for the month. This brought its annual level down to 4% from 4.9% in April. Some might say that supports the case for Fed officials to give it a miss this time around. However, core inflation rose 0.4% on the month and remained up 5.3% from a year ago.
Furthermore, experts clarify that months may be needed for the effects of interest rate changes to become fully reflected in the economy. Accordingly, even after a current assessment of data, there remains the risk that the Federal Reserve might "overdo it" with its rate hikes, slowing growth by more than needed to tame inflation.
Federal Reserve Chairman Jerome Powell is expected to be conflicted between the urge to control inflation and wanting to get the economy growing again post-COVID-19 lockdown, and amid fallout from the energy crisis caused by sanctions on Russia, analysts
previously told Sputnik.
Sure, the US government managed
to dodge a debt default with its last-minute debt ceiling deal, however its economy could face "stagflation" - stagnating economic growth combined with rampant inflation,
economists underscored. The latest
report by the US Bureau of Labor Statistics (BLS) contained downward revisions of earlier estimates for wages, average working hours per employee, productivity, and gross domestic product (GDP) growth. Over the past week, gross domestic product data for the first quarter showed a 1.1% growth on the year versus the 2.6% in the fourth quarter of 2022.
Furthermore, the US national unemployment rate, albeit at
a historically low 3.7%, is known to rise after interest rates are increased, besides carrying the risk of triggering a recession, which many
top financiers anticipate later this year.
Amid expectations of the Fed's policy announcements, a group of ten lawmakers
called on the central bank officials to stop monetary tightening, warning that it was fraught with the
"potential to throw millions of Americans out of work."There will be a measure of dissent regarding the interest rate decision at the Federal Open Market Committee meeting, believe around 40% of cited US economists. They singled out several "hawks," like Dallas Fed President Lorie Logan and Governor Christopher Waller, and Minneapolis Fed President Neel Kashkari, all purportedly arguing against a pause amid concerns that progress on curbing inflation has stalled.
“Inflation is still too high. The Fed opened the door for a pause and to not walk through that door now would cause unnecessary concern. But they are going to have to communicate their work is not done,” Lindsey Piegza, chief economist at Stifel Nicolaus & Co., stated.
Economists believe that the FOMC statement on Wednesday may note that it will be keeping rates unchanged “for now” or “at this meeting,” hinting at further cuts looming ahead.
