Federal Reserve Board Chairman Jerome Powell is scheduled to speak at a news conference following the Federal Open Market Committee meeting at the Federal Reserve in Washington, DC on July 26, 2023 (Saul Loeb | AFP | Getty Images). As is typical, the focus of this week’s meeting will be less on current actions and more on future expectations. Currently, the chances of the U.S. central bank increasing its benchmark borrowing rate are virtually nonexistent. However, attention will be on the Fed’s quarterly update on key indicators such as interest rates, GDP, inflation, and unemployment. Here’s what to anticipate.
Interest Rates:
It is unlikely that the Fed will adjust its key funds rate. Historically, Chair Jerome Powell’s Fed prefers not to go against market expectations. The funds rate will most likely continue to be within its current target range of 5.25%-5.5%, the highest it has been since the early 2000s. While it is expected that the Fed will signal a pause, there is a possibility that the November meeting could result in another rate hike.
The Dot Plot:
The Fed uses its dot plot to communicate its future rate expectations. Analysts will be looking for subtle shifts in the dots to gauge where officials see rates heading. The “longer run” median dot, which looks beyond 2026, will be a key focal point. Any increase in this dot could indicate the Fed’s willingness to let inflation surpass its 2% target.
The Summary of Economic Projections (SEP):
The Fed regularly updates its SEP, which provides an outlook on rates, inflation, GDP, and unemployment. In the past, these projections have been far from accurate, leading to policy adjustments and market instability. This time, the Fed is expected to revise its projections with a significant upgrade to GDP growth and reductions in inflation and unemployment outlooks.
The Statement:
While the SEP and dot plot garner the most attention, potential changes in the post-meeting statement are also significant. Adjustments to the characterization of policy and the Fed’s view on the economy could indicate a shift in their stance. Removing the word “additional” may imply that no more rate hikes will be necessary, while removing the word “highly” from the inflation risks sentence may signify diminished concern about inflation.
The Press Conference:
Following the release of the statement, Powell will hold a press conference to answer questions from reporters. Powell’s remarks have the potential to provide additional insights and could impact the markets. Currently, there is a belief among investors that the Fed has concluded its rate-hiking cycle. Any indication from Powell that contradicts this sentiment could have a significant impact.
Despite market expectations, some experts believe that the Fed still has room for rate hikes. However, most analysts anticipate the Fed will align with the market consensus and maintain a more cautious approach.
Denial of responsibility! Vigour Times is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
