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Wednesday, October 4, 2023

Fed set to raise rates to 22-year high, may end rate-hiking

Federal Reserve policymakers are expected to raise interest rates to the highest level in 22 years, signaling the possibility of another increase later this year. The Federal Open Market Committee (FOMC) is likely to raise rates by a quarter point to the 5.25% to 5.5% range, making it the 11th increase since early 2022.

Chair Jerome Powell will announce the decision at 2 pm in Washington, followed by a press conference 30 minutes later. Investors will be keen on Powell’s remarks, gauging the central bank’s determination to raise rates further in 2023.

Despite inflation pressures subsiding, the decision is seen as almost certain, with no additional increases expected, but the FOMC had penciled in a final hike later in the year.

The FOMC statement is expected to maintain a tightening bias, hinting at the possibility of “additional policy firming.” Economic growth will likely be described as “modest,” and there may be debates on acknowledging recent inflation progress or stating that it remains elevated.

Additionally, there might be discussions on whether to retain or drop the statement of confidence in the banking industry following the recent stabilization.

During the press conference, Powell will be questioned about the FOMC’s forecast for another hike, especially in light of better-than-expected inflation news in June. His assessment of the latest consumer price reading, showing a drop in the annual rate of inflation to 3%, will also be of interest.

While Powell sees a narrow path for a soft landing, there have been predictions of a US recession from the Fed staff, which may prompt inquiries about his views on the matter.

Overall, investors will be closely monitoring the Fed’s actions and Powell’s statements for insights into the central bank’s stance on further rate increases and their assessment of the economy’s performance.

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