After RBI MPC verdict, US Fed to unveil policy decision next week: Here's what experts predict | Mint
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Business News/ Economy / After RBI MPC verdict, US Fed to unveil policy decision next week: Here's what experts predict
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After RBI MPC verdict, US Fed to unveil policy decision next week: Here's what experts predict

Market analysts underscore that the recent statements from the US Federal Reserve officials indicate that the US central bank is currently not considering raising interest rates in its last policy meeting of 2023.

(FILES) File photo shows the US Federal Reserve in Washington, DC. AFP PHOTO/Karen BLEIER/FILESPremium
(FILES) File photo shows the US Federal Reserve in Washington, DC. AFP PHOTO/Karen BLEIER/FILES

The Reserve Bank of India (RBI)-led Monetary Policy Committee (MPC) unveiled its fifth policy decision for the financial year 2023-24 (FY24) earlier today and kept the interest rates unchanged, in line with D-Street estimates. The US Federal Reserve is now all set to reveal its policy outcome on Wednesday, December 13.

Market analysts underscore that the recent statements from the US Federal Reserve officials indicate that the US central bank is currently not considering raising interest rates in its last policy meeting of 2023. 

Despite this stance, the ongoing battle against inflation remains the Fed's priority, and it would be premature to anticipate a rate cut at this juncture, as per analysts. However, economists broadly estimate that the Fed may start cutting interest rates from March 2024 onwards.

Also Read: Fed economists need to be flexible on forecast methods, US economy prone to shocks: Jerome Powell

In its last policy meeting on November 1, Jerome Powell-led Federal Open Market Committee (FOMC) decided to keep the key overnight interest rates unchanged at 5.25-5.50 per cent.  The central bank had kept interest rates steady at a 22-year high for the second time in a row, as inflation still remains above the Fed's 2 per cent target level.

The Fed's statement noted that with job gains still strong and inflation still elevated, the central bank continues to consider “the extent of additional policy firming over time." The gross domestic product (GDP) of the US expanded at an annualized rate of 4.9 per cent in the third quarter, according to the US Bureau of Economic Analysis (BEA) first estimate.

US Federal Reserve to unveil policy decision on December 13: Here's what to expect

Fed officials are widely expected to keep borrowing costs at the highest level in two decades when they meet next week. Chair Jerome Powell has repeatedly pushed back against growing bets of rate cuts early next year, stressing that policymakers will move cautiously but retain the option to hike again. Treasury yields rose sharply after the figures.

“All in all, expectations of many cuts next year that begin in the first quarter will be pared back," Derek Tang, an economist with LH Meyer/Monetary Policy Analytics told Bloomberg News. “Fed policymakers will seize on this to call for patience and a longer hold."

The US labor market unexpectedly strengthened in November with pickups in employment and wages, deflating bets the Federal Reserve will cut interest rates early next year. Nonfarm payrolls increased 199,000 last month following a 150,000 advance in October, a Bureau of Labor Statistics report showed Friday.

"The Fed has signalled the end of the rate hiking cycle and will pause in the coming policy meet. A rate cut by the Fed is likely by mid-2024 and that is when the MPC also can go for a cut, assuming no major changes in the macro scenario," said Dr V K Vijayakumar, Chief Investment Strategist at Geojit Financial Services

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Published: 08 Dec 2023, 08:42 PM IST
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