Today is an important day for the american economy as the long-awaited Fed meeting will take place at around 19:00 (UTC).
The Federal Reserve is expected to keep interest rates steady at its upcoming meeting but may signal a potential rate cut in September. Market indicators suggest a strong likelihood of a rate reduction during the Fed’s mid-September session, with speculation centered on whether the cut will be a modest quarter-point or a more substantial half-point.
The Fed has maintained its policy rate within the 5.25%-5.50% range for the past year. A half-point cut would likely require clear signs of a rapid economic slowdown that could endanger the current low unemployment rate of 4.1%.
Despite aggressive rate hikes aimed at controlling inflation, the economy has shown resilience. The second quarter saw a solid 2.8% annual growth rate, and job market data remains robust, with over 8 million job openings and a decline in layoffs. Employment metrics are stabilizing at pre-pandemic levels, suggesting a balanced job market.
The employment cost index increased by 0.9% in the second quarter, falling short of the 1% increase predicted by economists. This may imply that wage growth is unlikely to spur further inflation.
Analysts anticipate that Powell will stress the Fed’s data-dependent approach, with upcoming economic reports, including July’s employment figures, playing a crucial role in future decisions. Inflation continues to slow, with the PCE price index rising at a 2.5% annual rate in June and averaging around 1.5% recently, compared to the Fed’s 2% target. Tim Duy from SGH Macro Advisors suggests that the Fed may delay significant rate cuts, with current data supporting a gradual rather than immediate adjustment.
Cryptocurrency investors are closely watching the Federal Reserve’s interest rate decision set for tomorrow.
BlackRock Investment Institute is skeptical about the Federal Reserve implementing as many rate cuts as the bond market anticipates.
Billionaire Peter Thiel has expressed concern that the US economy would likely be in a recession if not for extensive government intervention.
A group of Democratic senators, led by Elizabeth Warren, is pressing Federal Reserve Chair Jerome Powell to implement a significant reduction in interest rates to protect the U.S. economy.