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- The Federal Reserve is widely anticipated to maintain the current policy rate for the third consecutive meeting.
- Federal Reserve Chairman Jerome Powell is scheduled to address the policy outlook in a highly anticipated press conference.
- The US Dollar may exhibit continued resilience against other major currencies if the Federal Reserve maintains a vigilant focus on the inflation outlook.
The United States Federal Reserve is poised to release its monetary policy decisions following the conclusion of its May policy meeting on Wednesday. Financial markets overwhelmingly expect the US central bank to hold steady on its policy stance, marking the third consecutive meeting with no changes to the benchmark interest rate. This follows a 25 basis point reduction in December, which brought the target range to 4.25%-4.5%.
According to the CME FedWatch Tool, market participants are assigning a negligible probability to a rate cut occurring in May. Looking ahead, the tool indicates that there is approximately a 30% probability of a 25 basis point rate cut taking place in June. Consequently, investors and analysts alike will be meticulously examining the nuances of the policy statement and carefully analyzing the remarks delivered by Federal Reserve Chairman Jerome Powell during the post-meeting press conference. The primary objective will be to glean any insights or forward guidance regarding the potential timing of the next adjustment to interest rates. Furthermore, the market will be closely watching for any signals regarding the Fed’s assessment of recent economic data, including inflation figures, employment reports, and GDP growth, to better understand the central bank’s reaction function.
Leading up to the Federal Reserve’s customary blackout period, a number of policymakers articulated concerns regarding the uncertainties introduced by the evolving US trade landscape and its potential impact on the labor market. These concerns centered around the possibility that new trade policies could disrupt supply chains, increase input costs for businesses, and ultimately lead to a slowdown in hiring or even job losses. The Fed will likely address these concerns in the context of overall economic growth and its dual mandate of price stability and full employment. The market anticipates further clarification on how the Fed intends to balance these potentially conflicting objectives in the coming months.
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