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For the third meeting in a row, the US central bank is anticipated to hold interest rates steady. Decisions are taken meeting by meeting, and officials maintain that data is the primary source of information.
After raising rates to their highest point in more than 20 years in less than a year, market participants anticipate that policymakers will do nothing and keep the policy rate at 5.25%–5.5% for the third consecutive meeting.
The Federal Open Market Committee’s (FOMC) Summary of Economic Projections (SEP) will be released in conjunction with the announcement. FOMC participants predict that PCE inflation will decrease from 3.3% by the end of 2023 to 2.2% by the end of 2025, based on projections from September.
Nonetheless, officials continued to see the Fed funds rate peak at 5.6% this year, unchanged from the previous June projection, suggesting that there is still a 25 basis points (bps) rate hike on the table.
Fed members made it clear that they intend to keep rates higher for longer, while speculative interest believes the tightening cycle is done and bet on a potential rate cut as soon as in Q2 2024.
Citibank economists anticipate a dovish announcement, as they don’t expect the FOMC to deliver the last rate hike anticipated in the previous meetings. They expect that the Fed will revise their 2023 core PCE inflation lower and that the 2024 and 2025 median dots in the SEP move lower by 50 bps to 4.625% and 3.375%, respectively. The 2024 dot would then imply 75 bps of cuts in total for 2024, more than what the dots were showing in September.
The Federal Reserve is scheduled to announce its decision and publish the monetary policy statement at 19:00 GMT, followed by Chairman Jerome Powell’s press conference at 19:30 GMT.
The most likely scenario is that policymakers will opt to keep interest rates unchanged. The latest CPI figures were not enough to spur speculation of a potential rate hike in the docket but weighed on the market’s speculation about potential rate cuts through 2024.
FOMC minutes
