Market Expectations: US Fed Meeting Starts Amid Rumours of Rate Changes
Today is the start of the US Fed meeting: The US Federal Reserve is not expected to surprise the market with regard to interest rate changes, but all eyes will be on the Federal Open Market Committee’s (FOMC) interest rate decision on Wednesday, March 20.
The Federal Reserve may not give a precise schedule for rate reductions, according to the majority of economists, who believe the central bank would base its monetary policy on macroeconomic data. On the other hand, most people are expecting rate reductions to start as early as June.
Expert Views: Elements Affecting the US Federal Reserve’s Interest Rate Decision
We predict that by the latter part of the year, the Fed will begin reducing interest rates. But the key to determining how soon the rate cycle can turn will be the arrival of statistics on inflation and employment, according to AUM Capital’s National Head of Wealth, Mukesh Kochar.
The following three crucial factors, according to experts, will affect the Fed’s decision on interest rates.
- The US Consumer Price Index (CPI) increased 3.2% year over year in February, marking the beginning of an inflationary trend. This was just more than the 3.1% market estimate.
For the second month running, inflation has exceeded forecasts. Since inflation has been steadily rising above the Federal Reserve’s 2 percent objective, it will be interesting to see how the central bank evaluates the rate of price increases. - Economic growth: The Fed makes policy decisions based on a variety of factors, not just inflation. The effects of the rate increases that were started two years ago must also be taken into account by the central bank. Before changing its course on policy, it is expected that the Fed will assess the impact on the economy of a prolonged period of high interest rates.
- Conditions of the labour market: While still tight, the US labour market is beginning to show some symptoms of weakness.
“The employment trends index of the Conference Board eased to 112.29 in February from a downwardly revised 113.18 in January,” according to a Wall Street Journal (WSJ) report.
“However, there are nevertheless signs that the labour market is still largely robust”. US Fed meeting added a higher-than-expected 2,75,000 more jobs last month, according to Labour Department figures released last week, which are supported by the most recent data, the Wall Street Journal reported.
The Federal Reserve has been actively attempting to control inflation by stabilising the labour market. Following the policy meeting on Wednesday, investors will be closely observing Fed Chair Jerome Powell’s press conference to learn how the central bank is interpreting the most recent labour market indicators.
Expert opinions on the US Fed meeting with AUM Capital’s National Head of Wealth, Mukesh Kochar
We anticipate rate stability from the US Fed meeting. A clear hold case for the time being is suggested by the last-minute release and the different data points.
The previous two inflation data points were marginally higher than anticipated, and different remarks made by Fed officials imply that they would like to hold off on making changes to policy until they are certain that inflation will continue to head towards two percent.
Examining the Fed’s advice for the remainder of the year during this meeting is crucial Director Sharad Chandra Shukla of Mehta Equities
The US inflation rate as of late is still higher than the Fed’s aim. Our study indicates that the US Federal Reserve will likely maintain its benchmark interest rate at its current level. The Fed Chairman’s remarks regarding the status of the economy and the outlook for inflation, however, will command the attention of the market.
Rate reductions, in our opinion, would begin somewhere in the second half of 2024. According to US Fed meeting officials, three decreases are anticipated in 2024. Indian markets have already priced in maintaining the status quo at the upcoming meeting, which has shifted attention to the Fed’s remarks for the first time in seventeen years, the Japanese central bank increased interest rates. We believe that this decision would lead to increased volatility and have a negative effect on Japanese equities as well as serious ramifications for global financial markets. This move will be taken into account by the US central bank when making decisions.
Tradejini’s COO, Trivesh D
The next policy meeting of the Federal Reserve is an important occasion, particularly in light of the impending Lok Sabha elections in India.
After the election, a stable administration would boost the rupee and draw in foreign capital, which might have an impact on the Fed’s interest rate decision. The Fed will be keeping an eye on international variables like the rupee-dollar exchange rate and crude oil prices in addition to local US statistics like growth and inflation. A number of variables, such as inflation, job market dynamics, economic growth, and worldwide economic trends, affect the Federal Reserve’s monetary policy decisions.
The US Fed meeting have dual purpose to support price stability and maximum employment greatly influences how it formulates policy. The Fed also considers how its policies may affect the larger financial system and issues related to financial stability.
Another important factor to take into account is inflation, which the Fed seeks to maintain at or below its target rate of two percent.
The meeting’s conclusion will influence international financial markets and attract investors from all around the world. Another level of interest is created by the interaction between the political climate in India and the Fed’s policy.
Head of Research at Arihant Capital, Mr. Abhishek Jain
The market is eagerly expecting the outcome of the FOMC meeting and, more significantly, the words used by Fed Chair Jerome Powell in his press conference, even though no cut is expected.
Any clues about potential future policy are very interesting to analysts.
The US Fed meeting decision is primarily influenced by two factors: inflation and the direction of future policy.
The Federal Reserve’s 2-percent inflation objective is still being exceeded by inflation, as evidenced by the 3.2% CPI figures for February.
The market is searching for hints regarding the likelihood of rate reductions beginning in June, contingent on the Fed’s evaluation of inflation management advancements.
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