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.
Goldman Sachs strategists, led by Christian Müller-Glissmann, are forecasting greater resilience in the U.S. stock market than many investors expect, suggesting a low probability of a severe recession.
Recent indicators suggest that the U.S. may avoid a recession in 2024, reversing earlier concerns.
US inflation fell to 2.5% in August, setting the stage for the Federal Reserve to consider cutting interest rates at its meeting next week.
In recent developments, a surprising alliance between presidential candidate Donald Trump and Tesla’s Elon Musk has emerged, marked by mutual endorsements and shared views.