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Wednesday, July 24, 2024

Live Updates from Fed Meeting: Inflation Persists, Will Interest Rates Be Cut Today?

The Federal Reserve is unlikely to cut interest rates during its two-day meeting in June, as inflation remains above its 2% goal. The benchmark interest rate is expected to remain within the range of 5.25% to 5.5%, a level that has persisted for almost a year and marks a 23-year peak.

Key Points:

  1. No Interest Rate Cut Expected:
    • The likelihood of a rate cut is considered remote, with economists and investors anticipating no change to the benchmark rate.
    • The Fed’s benchmark interest rate is expected to remain within the range of 5.25% to 5.5%, a level unchanged since last year and nearing a 23-year high.
  2. Inflation Impact:
    • Inflation remains a persistent issue, and most economists have revised their rate cut predictions to two, one, or none in 2024.
    • High interest rates increase borrowing costs, which in turn curb spending and the economy, generally leading to a decrease in overall price hikes.
  3. Fed Meeting Schedule:
    • The Federal Reserve will announce its interest-rate decision at 2 p.m. Eastern Time on Wednesday, followed by a press conference by Jerome Powell at 2:30 p.m.
    • The meeting will provide insights into the central bank’s perspective on the overall economy, with market participants scrutinizing Powell’s statements for any hints regarding future rate adjustments.
  4. Market Reaction:
    • In the absence of a rate cut, investors will analyze Powell’s remarks to gauge potential rate actions from the Fed throughout the year.
    • The market will be closely watching for any indications regarding when the central bank might reduce its key rate and how many times it might do so in 2024.
  5. Inflation Data:
    • Fresh CPI inflation data, set for release at 8:30 a.m. on Wednesday, will provide policymakers with an up-to-date snapshot of the current state of prices.
    • The data could influence the Fed’s decision, but it is unlikely to affect the Federal Reserve’s vote on interest rates later today.
  6. Future Rate Cuts:
    • Economists believe that the current conditions, with inflation moderating and a solid economy, will allow for a first-rate cut in September or December.
    • The Fed’s caution is driven by the risk of cutting borrowing costs too early and then having to reverse course because inflation gets stuck.

Overall, the Fed meeting is expected to maintain the status quo, with no interest rate cut anticipated today. However, the market will closely follow Powell’s statements for any hints regarding future rate adjustments and the timing of potential rate cuts later in the year.

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