It is expected that the central bank will keep the federal funds rate at its highest level in 23 years.
Many central bank watchers are looking forward to when It will start cutting interest rates.
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What Central Bank Governors are Expected to Do
Most economists and traders believe that the Federal Reserve will maintain its benchmark interest rate when it announces its monetary policy decision on Wednesday. The Federal Reserve has kept the influential interest rate at its highest levels in 23 years since last July, aiming to slow the economy and thereby tame inflation.
To some extent, this approach has been successful. While progress has largely stalled so far this year, inflation has significantly decreased from its peak in 2022. The labor market has started to weaken through a decrease in hiring rather than more layoffs, which is precisely what the Federal Reserve said it wanted to see.
Where They Go From Here
Some economists have argued that central bank governors should cut interest rates at this week’s meeting, no matter how slim the chances of this action’s success. On the other side of the spectrum, other economists believe that the Federal Reserve should wait until next year.
However, neither outcome seems likely, even according to those theorizing. Most central bank watchers expect Federal Reserve officials to start making cuts when they meet next September. Despite the non-partisan nature of the Federal Reserve, cutting rates in September could be controversial in an election year. However, the Federal Reserve has set a precedent for cutting interest rates before elections in the past.
What Jerome Powell Will Say
After the meeting concludes on Wednesday, Federal Reserve Chairman Jerome Powell will hold a press conference, where he is likely to repeat his recent comments.
He has recently spoken about how the focus of central bank governors in the United States is likely shifting from fighting inflation to balancing their dual mandate of maintaining employment without reigniting price increases.
Economists do not expect Powell to shed more light on the timeline for rate cuts during the press conference.