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Saturday, May 18, 2024

The Federal Reserve is expected to hold rates amid easing inflation

Key Takeaways:

  • The Federal Reserve is expected to maintain interest rates at the current level of 5.25-5.50% during the upcoming FOMC meeting, with a 99% probability of no rate hike according to the CME FedWatch Tool.
  • Inflation has eased over the past year but remains elevated, and the Federal Reserve’s goal is to bring it back to the target level of 2%.

The Federal Reserve is anticipated to maintain interest rates at their current level of 5.25-5.50% during the upcoming Federal Open Market Committee (FOMC) meeting. This expectation is supported by the CME FedWatch Tool, which shows a 99% probability of no rate hike at this meeting.

CME Target Range Probabilities

The decision to hold rates steady comes after a series of aggressive rate hikes that began during the COVID-19 pandemic. As the economy started to recover, inflation began to rise rapidly, prompting the Federal Reserve to take action to control rising prices. The central bank implemented a series of rate hikes, starting in March 2022, which saw the federal funds rate rise from near zero to its current level.

The rate hikes were aimed at cooling down the economy and bringing inflation back under control. The Federal Reserve’s target inflation rate is 2%, and the recent easing of inflation has given policymakers some room to pause the rate hikes.

The Possible Outcome

The decision to hold rates steady is also supported by recent economic data. The labor market remains strong, with job gains moderating but still robust, and the unemployment rate staying low. Economic activity has been expanding at a solid pace, although the outlook remains uncertain.

The Federal Reserve has indicated that it will assess incoming data, the evolving outlook, and the balance of risks when considering any adjustments to the target range for the federal funds rate. The committee does not expect to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2%.

In addition to holding rates steady, the Federal Reserve will continue to reduce its holdings of Treasury securities, agency debt, and agency mortgage-backed securities, as outlined in its previously announced plans. This is part of the central bank’s efforts to normalize its balance sheet and unwind the emergency measures put in place during the pandemic.

The U.S. dollar, as measured by the DXY index, is currently up 0.21%. It’s unclear whether or not this trend will continue depending on the possible outcome of the interest rate decision.

DXY 1-Minute Price Data
Lazarus
Lazarushttps://ljlnews.com
Publisher and editor of LJLNews. I am a Stock Market enthusiast, with an interest for politics. I hope you enjoy reading the articles! Contact me at: Lazaruslucas@ljlnews.com

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