Federal Reserve officials plan to keep interest rates steady this week. This pause comes after three cuts that reduced the rates by one whole percentage point since September. The current target range for rates is 4.25% to 4.5%.
Many Fed policymakers believe there won’t be as many rate cuts this year because the US economy seems strong and inflation is higher than they expected. On Friday, the latest inflation data will be released, which the Fed typically pays close attention to.
Economist Gregory Daco said, “They’re skipping a rate cut,” but they want to remain flexible in case they need to adjust rates later. The Fed will announce its decision at 2 PM on Wednesday, followed by a press conference with Chair Jerome Powell.
Experts don’t expect many changes in their statements after the meeting since the current wording allows them to be flexible based on the economy’s performance. During the press conference, Powell will likely be asked about how President Trump’s policies affect the economy.
In December, many Fed members considered Trump’s plans while discussing the economy and noted that inflation risks might be higher than before. Investors are also interested in understanding what “neutral rate” means, which is the interest level where the economy is stable.
Reporters may ask Powell about what signs could lead to a rate cut or an increase. Recently, a strong job report raised some concerns that the Fed might have to raise rates again. However, a key inflation report came in lower than expected, which pleased policymakers but highlighted the need to lower inflation to their target of 2%.
Powell might also face questions about Trump’s comments on interest rates. Trump recently claimed he knows more about interest rates than the Fed does, hinting that he could influence their decisions more. Michael Feroli from JPMorgan Chase believes this week’s meeting might be calm, but we should prepare for a busy year ahead for the Fed.
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