Fed Seen Holding Rates with Hike Still on Horizon
The Federal Reserve policymakers of the United States are expected to hold still the interest rates when they meet this week however may tweak their elaboration of economic outlook to reveal more benign conditions, leaving path open for the future rise in rate.
Fed raised its policy interest rate last Dec. for the 1st time in almost a decade when the market instability finally subsided in wake of scare over the China’s economy.
Likewise early this year the markets wobbled on the concerns regarding a slowdown in the global economic growth and the weak United States’ corporate earnings, leading to the expectations for auxiliary Fed rates rises to be studied down, so the Fed policymakers might be wary of this week transfer too strong a message of an imminent policy tightening.
Many Fed officials remain startled by steep stock market drop and by the weak first-quarter United States economic data.
The solid cues of the higher inflation & growth may be needed before FOMC, that is the Fed’s policy committee, remains with projected gradual path toward the more normal stages of interest rates.
However, the economy is generating jobs, consumer prices have risen, providing support for a Fed interest rate rise, weakness in retail sales, and the international trade, as well as worried about China’s economy, are among the reasons why Fed Chair Janet Yellen will stay guarded about further rate hikes before the 2nd half of year.
“I do not think they can pull off a June hike without triggering another round of volatility, and they do not want that because the selloff in Jan & Feb. left a deep scar,” said Aneta Markowska, who’s the chief U.S. economist at Societe Generale.
“The FOMC cannot go too hawkish overnight because markets are not pricing in anything close to that.”