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As of July, interest rates have been at their highest level in 23 years for exactly one year. While many people are speculating about possible changes, a rate cut seems unlikely today. But market analysts are hopeful of hints of future reductions, possibly in September.
FED will announce interest rates at 21:00 today. Analysts largely expect the benchmark interest rate to remain unchanged. Following the announcement, Fed Chairman Jerome Powell will hold a press conference at 21:30 and his statements will be closely analyzed for indicators of the Fed's future actions.
Powell is expected to discuss the Federal Open Market Committee's (FOMC) decision on interest rates and offer explanations for its actions or inactions. His comments on the broader economic outlook will be scrutinized by market participants looking for signals of possible rate adjustments later this year.
Recent economic data has shown surprising resilience. The economy rebounded sharply in the second quarter, driven by rising consumer and business spending that offset declines in housing construction and a widening trade deficit. The Ministry of Commerce reported that gross domestic product (GDP) grew at an annual rate of 2.8% in the April-June period, compared with a 1.4% increase in the first quarter and a 2.5% increase for all of 2023.
Despite high interest rates and inflation over the past two years, the economy has remained solid, supported by strong employment and wage growth that has kept consumer spending stable. However, there are signs of strain as higher borrowing costs begin to impact households and businesses more significantly.
Economic forecasters do not expect an interest rate cut from the FED today. Instead, they predict the committee will acknowledge positive economic trends and hint at future rate cuts, possibly by September. Gregory Daco, chief economist at Parthenon EY, said the Fed would express “greater confidence” that inflation is moving sustainably toward its 2% target.
Beyond inflation, the Fed is also paying attention to broader economic risks. Ryan Sweet, chief US economist at Oxford Economics, noted that Powell has recently emphasized the risks to the economy and labor market if the Fed delays cutting interest rates for too long. Meanwhile, JP Morgan's chief US economist Michael Feroli warned that consumer fundamentals may not be as solid as previously thought.
*This is not investment advice.