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Are Feds Expected to Cut Interest Rates Again

Written By jeudi 24 mars 2022 Add Comment Edit

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It's already about March — Here'southward what to wait from the Fed's big statement

federal reserve
federal reserve

(Flickr / Federal Reserve)
Board of Governors coming together, January i, 1922

The Federal Reserve is non likely to raise involvement rates again this week.

Rather, its policy statement on Wed afternoon will be all about clues on how it will handle its next big decision in March.

It'south almost unanimously expected that the Fed will get out the target of the benchmark Fed funds charge per unit unchanged in a range of 0.25% - 0.50%.

This means the focus on Midweek volition entirely be on the diction of the statement.

The Fed is likely to maintain that the US economy continued to grow at a moderate footstep between the Dec 15-sixteen meeting and this week's gathering.

Think that the previous Fed argument was merely released terminal calendar month and while a lot has changed in markets since then not most as much much has changed in the economic system. The Fed's two-day meeting this week also comes just earlier the fourth-quarter and full-year Gdp numbers are released Friday.

Deutsche Bank's Joseph LaVorgna pointed out in a client note that following the drop in December retail sales the language on consumer spending may go downgraded. Nevertheless, the stunning pace of job gains during the aforementioned calendar month balances the Fed's assessment of risks to their outlook, according to LaVorgna.

This appraisal should allow the Fed to signal that a rate hike in March is all the same on the tabular array.

However, the recent volatility in the stock markets is something that could interrupt this plan. And in fact, it is already doing the Fed's work of tightening financial conditions, co-ordinate to Morgan Stanley's Ellen Zentner.

The FOMC'due south "dot plot" of projections last month showed that information technology's expecting to raise rates four times this year. Zentner argued that the dollar'southward rally, falling oil prices, rising credit spreads and the stock market sell-off telephone call for a reduction of expectations of growth and inflation forecasts.

Zentner writes:

"Wrapping it all together, in that location has been a substantial tightening of financial atmospheric condition since December — by our estimate the economic equivalent of four rate hikes. The Fed raises rates to tighten financial conditions, information technology loathes to motility when the marketplace has already washed its tightening for it."

Zentner thinks that the bar for a charge per unit hike in March "seems insurmountable now."

Goldman Sachs' David Mericle echoed a similar sentiment in a customer note, writing:

"Recent comments from Fed officials accept indicated continued confidence in the growth outlook and merely moderate business concern about financial market volatility, though we call back fiscal weather condition would have to ease somewhat for the FOMC to hike again in March."

Banking company of America Merrill Lynch'south Michael Hanson thinks that markets are likely to be disappointed on Midweek with a statement that's not as dovish as expected.

"We recall it is also early for the FOMC to capitulate on policy," he wrote to clients. "The Fed works on a different — much slower — clock than markets."

The one thing that could slow down the Fed's charge per unit-hike path is low inflation. Inflation expectations in several surveys have declined, while actual progress towards the Fed'south ii% inflation goal is slow and falling commodity prices are not helping the outlook.

On Wednesday, notwithstanding, the Fed is not going to provide any new economic forecasts and in that location also won't be a printing conference to explain these in detail.

And and so the statement really is all virtually how open the Fed keeps its options for subsequent rate hikes with the next large decision due in near six weeks.

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Source: https://finance.yahoo.com/news/already-march-heres-expect-feds-121300666.html

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