The US Federal Reserve is generally anticipated to leave interest rates stable on Wednesday, leaving the door open for another raise if necessary following a summer of mixed economic statistics.
The Fed has raised interest rates 11 times in the previous 18 months, raising its benchmark lending rate to levels not seen in 22 years as it battles inflation, which remains stubbornly above its long-term objective of 2%.
After decreasing dramatically over the previous year, inflation has risen again in recent months due to a surge in energy prices, putting further pressure on the Fed.
However, economists and traders continue to expect the US Federal Reserve to keep interest rates unchanged on September 19–20 in order to give policymakers more time to analyze the health of the world’s largest economy.
“We believe the Fed has reached the end of its tightening cycle. That opinion hasn’t altered in the last few months,” said EY Chief Economist Gregory Daco.
“We anticipate the Fed to follow through on strong pre-meeting signals and leave rates constant after rising rates in July,” Deutsche Bank analysts said in a note to clients on Friday.
The rate-setting Federal Open Market Committee (FOMC) is currently in a delicate position as it attempts to manage inflation through interest rate rises while avoiding a recession, a feat economists refer to as a “soft landing.”
Recent economic statistics indicating solid economic growth in the first half of the year, declining inflation, and a weakening labor market suggest the Fed may just be able to pull it off.
Goldman Sachs analysts recently reduced their projection for a US recession from 20% to 15%, while other economists, notably those on the Fed’s research team, think the US will not enter a recession.
“Recent data should leave the Fed heartened by sustained disinflation but cautious about re-acceleration of inflation due to the strength of activity,” Bank of America analysts said in a client note.
Some FOMC members, including Fed Chair Jerome Powell, have signaled that the Fed’s path to a gentle landing in the coming months is tight.
“I believe there is a golden opportunity that is unprecedented in recent modern Fed history,” Chicago Fed President and FOMC member Austan Goolsbee stated in a recent NPR interview.
Other regulators, notably Fed Governor Michelle Bowman, have recently stated that more rate rises are likely to be required to bring inflation down to the Fed’s 2% objective.
