January 30, 2023

The Fed is about to make history again

2 min read

New York
CNN Business

All eyes will be on him. Federal Reserve Wednesday as it wraps up a major policy meeting in Washington, D.C., which will affect millions of American families and businesses, as well as the economy, ahead of the midterm elections.

for the For the first time in 22 years The central bank expectation of Increase in interest rates Half a pointAmidst the worst inflation in 40 years, it is expected to be part of a series of aggressive measures to cool the economy.

In March, the Fed raised its benchmark borrowing rate. For the first time By the end of 2018, it had grown by a quarter of a percent.

But since then, inflation has been steadily rising, a Latest 40 year height. While the labor market has improved further, the Fed’s more general quarterly rate hike may not slow it down this time around.

Economists – some of whom are in the Fed – believe the United States is close to what experts call “maximum employment.” And with Russia-Ukraine conflict Even now, price pressures on things like food and energy are unlikely to ease anytime soon. This makes perfect fiscal policy cocktail.

Even so, owning one is still beyond the reach of the average person. Federal Reserve Chairman Jerome Powell said last month that a half-point increase would “be on the table.” Therefore, the policy announcement on Wednesday afternoon should not shock the stock market. The devil will be in the details and in his plans for a huge balance sheet with the guidance of the Fed’s policy-making committee.

“I expect the Fed to signal another half a percentage point increase in its next decision in June, and that additional increase – perhaps no explanation for the numbers or the intensity – will be in the second half of the year. I’m coming, “said Bill. Adams, chief economist at Bank of America.

Adams added: “The Fed wants short-term interest rates to return to a level that is at least neutral – meaning there is no increase or decrease in growth – as soon as possible without causing a stir in financial markets. Yes, “added Adams.

Yet it is difficult to say where this neutral level is. That could be about 2.5% or less, according to Adams.

The central bank’s decision will be published on ET at 2 p.m., followed by the first private press conference with Chairman Powell since the outbreak.

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