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FOMC and Guidance
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The Federal Reserve FOMC today at 2:00 pm EST, with market participants widely expecting the U.S. central bank to keep rates on hold Wednesday. Investors will closely watch Fed Chair Jerome Powell’s post-decision press conference and the Fed’s quarterly dot plot in its Summary of Economic Projections.
Federal Reserve chair Jay Powell faces a tricky balancing act this week to maintain flexibility in the U.S. central bank’s policy plans in the face of intense pressure to reveal when and by how much it intends to cut interest rates next year. The Fed decision on Wednesday is unlikely to be controversial, but the forecasts, dot plot, and press conference that accompany it may be.
While the November Consumer Price Index (CPI) reading saw inflation tick up by 0.1% month-over-month, Federal Reserve regulators convene for the December FOMC meeting to discuss monetary policy and interest rate maneuvers.
Against this backdrop, the Federal Reserve is set to hold interest rates for their third consecutive policy meeting and keep the federal funds rate at a 22-year high of 5.25-5.5 percent. As officials extend a pause in rate increases that have been in place since July, they are not ready to say interest rates have reached a “sufficiently restrictive” level to get inflation down to their 2 percent target. Nor are they willing to publicly discuss in greater detail the circumstances under which they would lower borrowing costs next year beyond improved price pressures.
Powell's challenge this week is that financial markets are not buying his warnings that additional monetary tightening is still on the table. Investors believe the world’s largest economy is already slowing enough to prevent the need for further rate rises. Moreover, they are convinced that incoming data will force the Fed to cut interest rates sooner than expected.
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