By Howard Schneider WASHINGTON (Reuters) - The U.S. Federal Reserve kicks off a two-day policy meeting on Tuesday with officials widely expected to ...
By Howard Schneider WASHINGTON - The U.S. Federal Reserve kicks off a two-day policy meeting on Tuesday with officials widely expected to keep interest rates on hold for now, but alsoBy Howard Schneider
Investors in contracts tied to the federal funds rate consider it a near certainty the U.S. central bank will leave the benchmark federal funds rate at the current range of between 5.25% and 5.5%, a step consistent with the Fed's shift to a slower and more considered pace of rate increases. One of those came at the July meeting. While the Fed's slower,"data dependent" pacing may lead officials to skip over September, analysts say there has been little in recent economic news that would prompt policymakers to take that last rate increase off the table.
As of the July meeting"it was still the case...that 'most participants continued to see significant upside risks to inflation,'" Feroli said, quoting from the minutes of that meeting. While inflation has slowed from its peak last year, underlying measures show prices still rising at about double the Fed's 2% target.
The outcome of Wednesday's meeting may already involve a tricky communications shift, as the Fed manages the approach of what is likely the end of its rate increases - if policymakers do raise the policy rate again it would likely come at the November meeting - and the transition to the time next year when they will likely begin reducing interest rates as a way to stay in synch with lower inflation.
As of June, officials saw the policy rate falling a full percentage point next year, alongside declining inflation and a rising unemployment rate, an outlook markets will be parsing closely for any changes and what that says about the underlying strength of the economy.
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