FED LIKELY TO HOLD INTEREST RATES
Policymakers take time to assess how much pressure is building in US economy
MARKETS do not expect the United States Federal Reserve to raise interest rates this week, as policymakers take time to assess how much pressure is building in world’s largest economy.
The central bank’s Federal Open Market Committee, which is due to begin a two-day meeting tomorrow, has signalled it will raise key lending rate at least twice more this year after kicking it up a notch last month.
But Wall Street since February has shown a tendency to swoon at the faintest hint the Fed might consider moving at a more aggressive pace.
And data that suggest the Fed might move four times this year under newly-installed Fed chairman Jay Powell has generated wild volatility in share prices.
While the central bank will leave the benchmark lending rate untouched on Wednesday when it announces the outcome of the meeting, investors will be reading anxiously between the lines for signs of how concerned officials appear to be about rising wages and inflation.
After years at with interest rates at zero in the aftermath of the global financial crisis, the US central bank has nudged the rate up six times since the first move in December 2015, moving in increments of 0.25, or 25 basis points.
“There’s just a level of disbelief that the Fed would actually raise rates a hundred basis points in a year, as if a hundred basis points is a lot,” said economist Joel Naroff.
“You’ve got this 10 years of low rates and people thinking it’s almost a birth right,” he added. “That’s creating a lot of the uncertainty.”