21 C
Dubai
Tuesday, February 11, 2025
spot_img

Inflation Anticipated Pause by US Federal Reserve as Approaches Target-1

The US Federal Reserve is widely expected to maintain interest rates at a 22-year high for the third consecutive meeting as it grapples with persistently high inflation. The financial markets are already factoring in this anticipated pause, prompting discussions among traders and analysts regarding the timing and pace of potential interest rate cuts by the US central bank.

Uncertainty Surrounding Policy Outlook

While a rate hike is considered unlikely, there is uncertainty about how the Fed will articulate its policy outlook for the upcoming year. The central bank, led by Chair Jerome Powell, has maintained a cautious stance, emphasizing that it would be premature to rule out the possibility of another rate hike if deemed necessary. This strategic ambiguity is seen as a “battle for optionality” as policymakers navigate economic uncertainties.

Divergence with Other Central Banks: Inflation 

The Fed’s approach contrasts with that of other central banks, such as the European Central Bank, which is showing increasing support for ending rate hikes amid declining inflation. The Fed’s commitment to keeping the door open for another rate hike is a unique feature in the current global monetary policy landscape.

Positive Economic Indicators

Recent US economic data, including low unemployment, robust job creation, positive economic growth, and declining inflation, have provided a favorable backdrop. The latest consumer price index (CPI) indicated an annual inflation rate of 3.2%, down from the pandemic-era peak of 9.1%. This positive data has raised hopes of achieving a “soft landing,” where the Fed meets its dual mandate without triggering a recession.

Implications for President Biden

The outcome of the Fed’s decisions holds significance for President Joe Biden, who is seeking reelection in 2024. Positive economic indicators, including steady job expansion, contribute to what Biden calls a ‘sweet spot’ for stable growth and lower inflation, which aligns with the Fed’s cautious approach.

Future Rate Cut Predictions

While a December pause is widely agreed upon, there is less certainty about the trajectory beyond. Traders and analysts are debating the potential for interest rate cuts in the future. Predictions range from Deutsche Bank’s forecast of 1.75 percentage points in cuts for 2024 to Barclays’ more conservative projection of the Fed remaining on hold until December 2024.

Quarterly Economic Projections and Press Conference

In addition to the interest rate decision, the Fed will release a quarterly update to its summary of economic projections (SEP). This update, coupled with Powell’s post-meeting press conference, is expected to offer insights into policymakers’ views on economic growth, inflation, unemployment, and the potential for interest rate cuts.

Overall Outlook

Analysts anticipate the Fed maintaining a cautious stance, potentially pushing back against the idea of imminent rate cuts. The central bank may prioritize leaving rates relatively high to manage potential risks, emphasizing its commitment to data-dependent decision-making.

Also Read

“Maximize Your Winter Break with These Enjoyable Activities Across the UAE”

Rental Rates Surge as Dubai Tenants Opt for Longer Leases in 2024

Related Articles

France and UAE Forge $50 Billion AI Data Centre Partnership to Drive Innovation

France and the United Arab Emirates have announced a landmark collaboration to develop a 1-gigawatt artificial intelligence data centre, with investments ranging between $30...

Greens Push for NBN CEO Pay Cut Amid Cost-of-Living Crisis and Privatization Debate

Greens Call for NBN CEO Salary Cut Amid Cost-of-Living Crisis and Privatization Concerns The Australian Greens have intensified their push for a reduction in the...

The Resilient Journey of Subhendra Basu: Innovation in Cybersecurity

Subhendra Basu’s career trajectory is a powerful story of resilience, perseverance, and intellectual curiosity. With over 24 years of experience across major technology companies...

Choosing the Best Cleaning Company in Dubai: A Complete Guide

Choosing the Best Cleaning Company in Dubai Dubai’s fast-paced lifestyle leaves little time for thorough cleaning, making professional cleaning services a necessity for homes, offices,...

Nvidia Revolutionizes AI & Gaming: Cosmos AI and RTX 50 Series Set to Redefine Innovation at CES 2025

Nvidia announced the GeForce RTX 50 Series graphics cards, powered by the new Blackwell architecture. At the Consumer Electronics Show (CES) 2025, Nvidia unveiled groundbreaking...

Latest Articles