Fed meeting: The US Federal Reserve’s policy decision following its October 27-28 meeting will be the key global event for markets this week. Investors will closely examine the policy statement and commentary for indications of the future interest rate trajectory.
The US Federal Reserve is expected to hold interest rates steady at its meeting despite stubbornly high inflation and with markets pricing in at least one rate hike before year-end, AFP reported.
The central bank’s Federal Open Market Committee (FOMC) will meet over two days, announcing its decision at 2:00 PM local time (18:00 GMT) on Wednesday, the AFP report added.
Seth Freeman sees December move as inflation stays at 3.5%
In an interaction with ET Now, Seth R. Freeman, Senior Managing Director at GlassRatner Advisory & Capital Group, discusses the Fed’s rate outlook, persistent US inflation at 3.5 per cent and why a December rate move remains possible.
“The Fed is not totally clear about its intentions and we still have three and a half percent inflation, but I I think they’re probably going to wait until December,” Freeman said.
Fed commentary and outlook
“I think one of the concerns is how increased interest rates jack up other costs particularly mortgages, credit card rates and so forth which make a big drag on US consumers,” said Freeman.
Bank of Japan and carry trade
“Maybe there will be a little more carry trade activity to the extent that the US and other borrowers can borrow at those kinds of rates and just buy treasuries here without any risk. But, I don’t think that’s very very helpful for Japan when there’s such a big delta in interest rates,” Freeman added.
Bond yields and geopolitics
“Rates softened a bit but I think they’re going to stay here until we get the rest of the world under control.This situation with what’s going on in Iran and announcements that there’s an increased risk. I think we are going to see sustained high interest rates,” Freeman said.
Fed missed two-percent target for inflation for more than 5 years
The Fed has missed its long-term two-percent target for inflation for more than five years, and at its last meeting in September the FOMC voted to raise the key federal funds rate for the first time in three years, lifting the target range to 3.75 percent to 4.0 percent, the AFP report added.
The Fed’s meeting comes days ahead of key midterm elections in the United States on November 3, with the Democratic Party seeking to wrest control of both houses of Congress from US President Donald Trump’s Republicans.
Trump vs Jerome Powell
Trump frequently berated and criticised Fed Chair Kevin Warsh’s predecessor Jerome Powell over interest rates — which he deems to be too high — but has so far refrained from targeting the man he appointed to replace him over the issue, the AFP report added.
The Fed’s preferred gauge for inflation, the Personal Consumption Expenditures (PCE) price index, hit a pandemic-era peak of 7.2 percent in 2022, before a series of interest-rate hikes tamed it to around 2.2 percent by late 2024.