As recovery and inflation accelerate, the Fed is expected to keep interest rates unchanged
As the US economic recovery accelerates and inflation rises, the Fed is expected to maintain the main interest rate at the lowest level of 0% to 0.25%, the lowest level since the beginning of the pandemic.
But at the end of the two-day policy meeting on Wednesday, the central bank will also formulate New economic forecast, Investors are concerned about whether most officials now predict the first interest rate hike in 2023, rather than as early as 2024.
The Fed is also expected to maintain its Stable asset purchase US$120 billion per month—another feature of the unusually loose monetary policy introduced in response to the economic impact of the pandemic—but officials are expected to discuss the timing and conditions for eventually starting to reduce these bond purchases.
This process is called “gradual reduction” and may be discussed for months before action is taken. The Fed has stated that compared with December last year, the economy must make “substantial further progress” before it can begin to slow down its support to the economy.
In the Fed’s last set of economic forecasts in March, participants in the Federal Open Market Committee predicted that GDP will grow by 6.5% this year and the unemployment rate will drop to 4.5%. The core inflation rate this year is expected to be 2.2%, and it will fall back to 2% in 2022.
Since the last FOMC meeting in April, the U.S. stock market has risen, while the 10-year U.S. Treasury bond yield has fallen as investors bet that the Federal Reserve will continue to implement monetary stimulus measures, and this year’s Inflationary pressure It will be short-lived.
The Fed’s decision will be made at 2 pm Eastern time, and then Fed Chairman Jay Powell will hold a press conference.