The Federal Open Market Committee (FOMC) is scheduled to make a decision on interest rates. In the previous meeting held in July, rates were raised by 25 basis points, reaching a level between 5.25% and 5.5%, which is a near 22-year high.
The current economic situation reveals that the annual inflation rate has risen to 3.7% in August from 3.2% in July, while unemployment has increased from 3.5% to 3.8% in August.
Market expectations suggest that the Fed will pause on rate hikes in September, waiting for more data, with anticipation of a rate increase in the November FOMC meeting.
However, there are risks and uncertainties associated with the Fed's aggressive monetary policy, which might risk economic stability. Rising borrowing costs could fuel inflation, and investors are keen to know when the rate hikes will stop.
The likelihood of a pause in rate hikes is supported by the steady slowdown in inflation and job market, giving the Fed a buffer to wait for more data. Fed officials, like Christopher Waller, have indicated comfort with current rates, suggesting no urgent need for change.
Factors influencing the Fed's decision include US economic "wild cards" such as the actual impact of interest rates on sectors like housing, consumer spending, and jobs. A possible government shutdown may halt the release of essential economic data, while rising energy prices might influence inflation further. Ongoing strikes, like the United Auto Workers strike, indicate labor market conditions.
The Fed will announce its decision at 2 p.m. ET, followed by a news conference at 2:30 p.m. ET by Fed Chair Jerome Powell. Despite rising inflation, the US Fed is likely to pause rate hikes in the September FOMC meeting, waiting for more data and monitoring various economic factors. The decision will be made clear on September 20.
