The expectations of the markets
Since the financial markets they expect the US central bank maintain interest rates at the end of the monetary policy meeting this Wednesday. Monetary leaders now have to judge whether the economy’s stronger-than-expected performance is the last breath of consumer waste that began during the COVID-19 pandemic, or proof that the monetary politics is not yet strict enough to fully restore the inflation at the 2% target set by the Fed.
Since the last monetary policy meeting in September, in which central bank officials also maintained the unchanged rates, The incoming data has shown a job growth higher than expected, stronger than expected economic growth and only a slow moderation in inflation which, at 3.4% in September according to the Fed’s preferred indicator, remains well above the target.
The iinverters consider it almost certain that the central bank will maintain its reference overnight interest rate in the range of the 5.25%-5.50% set at its July meeting and the odds also lean against further hikes in the future.
Fed: what were the reasons for maintaining caution
There are reasons for the central bank to be, as its officials have said, “prudent” when approving new rate increases. The most notable are the interest rates market-based, which have been driven higher by investors regardless of any action by the Federal Reserve. The Treasury bond yields Long-term mortgage rates in the United States have skyrocketed since last summer and the average rate on a 30-year fixed-rate mortgage rose nearly 8%, a level not seen in almost a quarter of a century. Ultimately, Federal Reserve officials believe these developments will curb spending by businesses and households.
However, in recent weeks it has not been very clear when this will happen, as the expected drops in hiring, the housing inflationspending on services and other key data have been postponed by an economy that does not give up.
Even the rising bond yieldscited by some senior officials of the Federal Reserve As a substitute for the central bank’s own rate hikes, it may simply be a recognition of the economy’s strength and an implicit signal that the Fed may have to do more to end the fight against inflation.
“We believe that real rates are higher due to the strong US growth“Citi analysts wrote ahead of this week’s Fed meeting. “If we are right, the Fed risks falling behind with respect to the real growth and inflation curve,” even if the economy slows from the torrid annual pace of 4.9% recorded in the third quarter.
He us central bank will publish its latest monetary policy decision this afternoon. The president of the Fed, Jerome Powell will offer a press conference.
Source: Ambito
