FOMC meet | What is expected from Fed's announcement today
“My sense is that we are going to get a pause,” said Matt Orton, Chief Market Strategist at Raymond James Investment in an interview with CNBC-TV18.
After a series of interest rate hikes, Federal Reserve officials are poised to take a breather and pause their tightening cycle. The meeting held from June 13-14 is expected to result in a decision to maintain interest rates between five percent and 5.25 percent, allowing policymakers to assess the current economic landscape and gauge the impact of recent challenges faced by the banking industry.
Chair Jerome Powell is likely to address concerns from some officials who believe that progress in curbing inflation has stalled. They suggest that the Federal Reserve may need to implement additional measures to rein in an unexpectedly strong economy. However, the consensus among experts is that a pause in interest rate hikes is imminent.
The US inflation rate slowed in May to its lowest annual rate in about two years, likely supporting Federal Reserve officials' desire to take a break from interest-rate hikes due today and evaluate the state of the economy. The US consumer price index (CPI), which measures changes in a multitude of goods and services, rose just 0.1 percent for the month, bringing the annual level down to 4 percent, lower than the estimate. The annual rate was 4.9 percent in April.
Matt Orton, Chief Market Strategist at Raymond James Investment, predicts a pause and urges investors to pay attention to Powell's statements. He emphasises that the Federal Reserve remains data-dependent, with inflation showing stubbornness and economic indicators displaying volatility. Orton advises taking the Fed's words seriously when they suggest that their tightening cycle may not be over.
Santanu Sengupta, India Economist at Goldman Sachs, highlights the positive US jobs data that exceeded expectations. This indicates a robust labor market, which suggests the potential for accelerated economic growth. As employment has a significant impact on consumer spending, a stronger job market is encouraging for the overall health of the US economy.
While the June meeting is likely to result in a pause, policymakers remain vigilant, closely monitoring economic data and maintaining flexibility to adjust interest rates in the future if necessary. The decision reflects a cautious approach to balance economic growth and inflation concerns in the United States.
Meanwhile, Jahangir Aziz, Head of Emerging Markets Economics Research and Commodities at JPMorgan said that the US Fed will likely pause in its next meeting, and this pause in rate hikes should last for a significant period.
He said, “The Fed most likely will pause, which is what our baseline view is. The market had expected the Fed to raise after the pre-meeting signals sent by both Jerome Powell and Vice Chair, Philip Jefferson, the market is basically looking at a much lower probability of a rate hike in June, but I think the pause is going to last for a very long time.”
(with inputs from Bloomberg)
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First Published: Jun 13, 2023 11:11 AM IST
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