The Fed is expected to hold rates
The Federal Reserve is not expected to raise interest rates when it announces its latest policy decision this afternoon. This does not mean that the central bank is done raising interest rates.
Yahoo Finance’s Jennifer Schoenberger reports:
The Federal Reserve is widely expected to hold interest rates on hold on Wednesday afternoon, leaving the door open for further inflation-cutting measures.
Many economists and Fed watchers expect the officials to pencil in one more rate hike before heading into an extended break.
“I think the market is right to expect the Fed to skip this meeting,” State Street senior global macro strategist Marvin Loh told Yahoo Finance on Tuesday, adding that the Fed remains “an option for another hike before they complete the tightening process.”
Following 11 rate hikes since March 2022, rates are now in the 5.25%-5.5% range, the most aggressive move from the central bank to tackle inflation since the 1980s.
But while many expect just one more rate hike, the bigger question may be how long the Fed will stay at higher rates. Will officials see a 100 basis point rate cut next year, or will there be smaller rate cuts, suggesting rates will remain high for longer?
Loh added: “They may signal that they will not cut back drastically into next year.” “So this higher long-term message is probably where we’re going to start to see concerns about interest rates … being higher over the last couple of days and a little more volatile in equity markets.”
Fed Chairman Jerome Powell may already know that his job is not done on inflation and that the Fed will continue on its path to return inflation to 2%.
Powell may reiterate the message from Jackson Hole that the Fed is “in a position to proceed with caution” as it moves forward, leaving rate hikes squarely on the table.
“One thing I’d like to credit Powell and company with is that they’ve led the markets very well so far,” Wisdomtree’s head of fixed income strategy Kevin Flanagan told Yahoo Finance.