US Fed meeting decision, inflation data to be out today: What to expect

The US Federal Reserve is expected to keep interest rates unchanged in today's announcement. With that, all eyes will on whether it adjusts its forecasts for potential rate cuts this year

The United States’ Federal Reserve Bank is expected to keep interest rates unchanged in Wednesday’s press conference, maintaining the benchmark lending rate of 5.25-5.50 per cent.

The Federal Open Market Committee (FOMC) is entrusted to review the economic conditions of the US to formulate the monetary policy just like India’s Monetary Policy Committee of the Reserve Bank of India did last week. 

All eyes are also on the US inflation data, with expectations that headline consumer price inflation cooled slightly last month. An opinion poll conducted by news agency Reuters suggested that economists expect the headline consumer price inflation to ease to 0.1 per cent from 0.3 per cent from last month. 

The inflation data will be out before the Fed announcement.

What economists say on US Fed rate cut probability?

According to analysts, the central bank of the US is not expected to announce any changes to its policy rate in the next meeting (scheduled for July) either. 

However, Friday’s job report (non-farm payroll data), which exceeded the expectations, has increased the prospect of inflation remaining sticky while growth stays strong, Reuters said. This development is reflected in the Fed's policy review as it has maintained a cautious approach, financial services group HSBC said.

Ahead of the announcement, Indian shares opened higher today, boosted by the IT stock, which is sensitive to the US interest rate policy. These stocks gained 1.25 per cent, the data showed.

While policy rate is expected to remain steady, the spotlight will be on whether the committee adjusts its forecasts for potential rate cuts later this year.

Kieran Williams, head of Asia FX at InTouch Capital Markets, told Reuters that the consensus on this appears to be that the number of cuts in 2024 will be downgraded from three currently to two.

A Reuters report also said that the odds of a rate cut announcement by the Fed in September is down to 56 per cent from 78 per cent a week ago. 

(With inputs from Reuters)