The Fed Expected to Hold Interest Rates
The Federal Reserve is expected to hold interest rates again at its Wednesday decision, with inflation remaining "sticky" and the labor market deemed resilient but not under acute pressure. These conditions are considered insufficient room for the central bank to begin easing policy.
Some economists believe the post-meeting statement will likely simply reiterate its wait-and-see stance, while acknowledging the better labor market news and higher inflation figures. The market itself is said to have priced in a 100% chance of the FOMC remaining "on hold," shifting the focus from the decision to the central bank leadership's communication.
However, this time, Jerome Powell's press conference is considered less significant due to the leadership transition. In the "most likely" scenario, Kevin Warsh is expected to take over when Powell's term ends in May, making subtle hints from Powell less relevant than during normal times.
On the fundamental side, inflation remains a key focus, with the Fed's preferred measure said to be around 3% on an ex-food and energy basis. Rising energy prices also add complexity: crude oil is said to be holding steady around $100 per barrel, while the average US national gasoline price has risen again to around $4.18 per gallon, narrowing the scope for an imminent interest rate cut.
The political dimension also adds to the cautious communication. Powell is described as having one of the most contentious relationships with the president in the institution's history, and uncertainty also surrounds his personal course of action after this meeting, including the option of remaining as governor for the remaining two years of his term.
Powell previously said he would not leave until the investigation into the renovation of the Fed headquarters is complete. The article mentions that Jeanine Pirro, the US attorney for the District of Columbia, transferred the investigation to the office of the Fed inspector general, a move seen as providing political space for Warsh's confirmation, although it remains unclear whether it meets Powell's previously stated "completely finished" standard. The market will now monitor the Fed's language on inflation, energy sensitivity, the composition of the vote (including potential dissent), and any signals related to the leadership transition, which could influence the direction of policy expectations heading into the next meeting. (gn)
Source: Newsmaker.id
