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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 post-meeting press conference.
- The US Dollar may exhibit continued strength against other currencies if the Federal Reserve maintains its emphasis on the inflation outlook.
The United States Federal Reserve is set 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 settings for the fourth consecutive meeting. This follows a previous reduction in the interest rate by 25 basis points in December, bringing the target range to between 4.25% and 4.5%.
According to the CME FedWatch Tool, market participants are assigning a negligible probability to a rate cut occurring in May. Furthermore, the tool indicates that there is approximately a 30% probability of a 25 basis point rate reduction in June. Consequently, investors will be closely analyzing any revisions to the policy statement and carefully parsing the remarks made by Federal Reserve Chairman Jerome Powell during the press conference following the meeting. The aim is to glean any new insights into the potential timing of the next adjustment to interest rates. Key economic indicators, such as the latest inflation figures and employment data, will also be crucial in shaping market expectations.
Leading up to the Federal Reserve’s customary blackout period before the meeting, several policymakers articulated concerns regarding the uncertainty introduced by the United States’ evolving trade policies and their potential impact on the labor market. These concerns highlighted the delicate balance the Fed must strike between controlling inflation and supporting economic growth. The minutes from the meeting will be closely watched for further details on the internal debate within the Federal Open Market Committee (FOMC) regarding these issues.
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