Federal Reserve Expected to Hold Rates, Delaying Policy Easing

Mumbai, 12 Jun (Commoditiescontrol):The Federal Reserve is anticipated to maintain its current interest rates on Wednesday, while new economic projections from the central bank suggest fewer rate cuts and a delayed start to monetary policy easing this year.

Despite the Fed's aggressive rate hikes in 2022 and 2023 to combat inflation, progress has been modest. With strong job growth alleviating concerns of a weakening economy, the central bank is likely to remain cautious about rate cuts, keeping the benchmark policy rate in the 5.25%-5.50% range set last July.

The upcoming release of inflation data could influence policymakers' outlook. However, analysts expect the Fed to hold its "no-rush" attitude towards rate cuts.

Inflation Data and Policy Projections

While the Fed's preferred inflation measure has decreased from its peak, policymakers remain cautious about committing to any cuts until they observe more progress. The upcoming Consumer Price Index (CPI) report, expected to show a modest increase in May, could provide insights into the inflation trajectory.

Market expectations for rate cuts have shifted, with the likelihood of a September rate reduction now less than 51%, according to CME Group's FedWatch Tool.

The Fed's "dot plot" projection for the benchmark policy rate is also expected to show fewer rate cuts this year, potentially reflecting the central bank's cautious approach to policy easing amid persistent inflation concerns.

Balancing Inflation and Economic Growth

The Fed faces the challenge of balancing its inflation target with supporting economic growth. While some aspects of inflation, particularly in housing and the broader services sector, remain elevated, policymakers acknowledge the risk of unemployment rising and warranting rate cuts.

The central bank's decision to maintain its current interest rates underscores its commitment to carefully assess economic data and ensure that inflation is on a sustainable path towards its 2% target before considering any policy easing.

Key Points:

Federal Reserve expected to leave interest rates unchanged on Wednesday.
New economic projections suggest fewer rate cuts and delayed policy easing.
Inflation data and Fed's "dot plot" projection will be key indicators.
Central bank aims to balance inflation target with supporting economic growth.
Decision reflects cautious approach amid persistent inflation concerns.

(By Commoditiescontrol Bureau; +91-9820130172)