The Federal Reserve is expected to keep US interest rates unchanged in Wednesday’s decision, according to the Refinitiv consensus, and leave the way open for a rise in Fed Funds later this year, after recent indicators point to the acceleration of consumer inflation in the United States. United.
The Federal Open Market Committee (FOMC) begins its two-day meeting this Tuesday and is expected to release the decision on Wednesday, around 3 pm. The president of the American central bank, Jerome Powell, will speak to the press at 3:30 pm, with investors keeping an eye on the tone of his statements.
“Although the US economy continues to grow robustly and inflation remains above the 2% target, the labor market has shown significant signs of relief in recent months, dampening the pace of wage growth, which reduces the risks to inflation prospects in the medium term”, assessed the senior economist for the USA at ABN AMRO, Bill Diviney, in a report. He is betting on US interest rates remaining this week.
The FOMC has raised interest rates in 11 of the last 12 meetings, to the range between 5.25% and 5.50%, the highest level in more than two decades. With maintenance priced for this Wednesday, authorities would have more time to assess how economic activity has responded to interest rate hikes. The big debate is whether a new high can be launched in November or December.
Investors are also focusing on a likely remodeling of projections by Fed authorities in the document known as “Dot-Plot”, to be released together with the interest rate decision. Economic data since the last “Dot-Plot”, in June, has surprised positively, which should result in upward revisions of several variables by central bank directors.
Goldman Sachs strategists predict that the Fed will raise its projection for US economic growth this year to 2.1%, compared to 1.0% projected in June, reflecting the resilience of activity. The projection for the unemployment rate at the end of the year should also be reduced to 3.9%, compared to 4.1%.
The bank ABN AMRO projects that Fed directors should revise upwards the projections for the consumption expenditure price index (PCE) for this year, driven by the appreciation of oil in international markets. The core PCE, however, which excludes changes in energy and food prices, is expected to remain largely unchanged.
Bank of America analysts stated that the “Dot Plot” projections should include another 25 basis point increase in American interest rates later this year, given data that showed the reacceleration of inflation. According to the US Department of Labor, consumer price inflation (CPI) advanced 0.6% in August on a monthly basis, at the highest pace in more than a year, pressured by energy costs.
“Powell should note that the work is not done on inflation, and that the Fed will stay the course to return prices to the 2.0% target. We do not project any future guidance regarding possible additional increases. Powell should continue to emphasize the dependence on data for decision-making,” said Bank of America US economist Michael Gapen in a report to clients.