The US central bank has decided to keep interest rates at 5.5%, in line with earlier predictions that anticipated no change. Despite inflationary pressures, economic data in the US remains positive. The labor market is tight, with a decrease in new job seekers and ongoing job seekers. The number of new homes sold in March also exceeded expectations. All of these factors indicate that the Fed may not lower interest rates in the coming months, at least not before September.
Financial markets are only expecting one interest rate cut by the Fed this year. Members of the Fed have been making ‘hawkish’ statements recently regarding the interest rate outlook in the US. They believe that inflationary pressures will postpone any interest rate cuts. In fact, it may take longer than expected to reach the level of confidence needed for a rate cut. Inflation rates in the US have been on the rise, with the March index showing a 3.5% increase on an annual basis.
Investors are eagerly awaiting Powell’s press conference for insights into the Fed’s future interest rate cuts and inflation rate predictions. Powell is expected to emphasize the need for caution and patience before any rate cuts are considered. The Fed may also announce a balance sheet tightening plan later this year. As for potential interest rate hikes, Powell is likely to suggest that the current policy is sufficient to deal with risks
