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Business News/ Economy / US Fed meet this week: Cooling inflation, resilient jobs market - will Fed hold rates steady?
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US Fed meet this week: Cooling inflation, resilient jobs market - will Fed hold rates steady?

The two-day US FOMC (Federal Open Market Committee) meeting is set to begin on Tuesday (December 12).

Expectations have been growing that the US Fed is inching closer to rate cuts. AFP PHOTO/Karen BLEIER/FILES (AFP)Premium
Expectations have been growing that the US Fed is inching closer to rate cuts. AFP PHOTO/Karen BLEIER/FILES (AFP)

Even as inflation is cooling and the labour market remains resilient, the US Fed is expected to keep interest rates steady in the current 5.25-5.50 per cent range after its two-day policy meeting on Wednesday, December 13.

The two-day US FOMC (Federal Open Market Committee) meeting is set to begin on Tuesday (December 12).

Expectations have been growing that the US Fed is inching closer to rate cuts but this could be too early to expect as inflation is still above the Fed's 2 per cent target and the recent US jobs data showed job growth rose last month.

According to a Reuters report, "the US job growth accelerated in November while the unemployment rate fell to 3.7 per cent, signs of underlying labour market strength that suggested financial market expectations of an interest rate cut early next year were probably premature."

The US consumer price report for November is due on Tuesday.

Also Read: US President Joe Biden calls labor market numbers ‘a sweet spot,’ expects Fed to call off interest rate hikes

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 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 VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Also Read: After RBI MPC verdict, US Fed to unveil policy decision next week: Here's what experts predict

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Trivesh D, COO, Tradejini underscored that the US Federal Reserve (Fed) is poised to uphold its steadfast hawkish stance.

"The Fed's resolute commitment to maintaining record-high interest rates, a strategy to combat inflation, is expected to persist, with no imminent plans for a reduction. This decision, while unlikely to trigger significant repercussions in the Indian stock market, underscores the fact that market participants have already factored in the effects of these unprecedented interest rates and the recent election dynamics," said Trivesh.

Moreover, Trivesh highlighted that the Fed's intent to sustain its current short-term interest rate serves as a clear signal that the conclusion of its rate-hiking campaign may be on the horizon.

Also Read: All eyes on Fed, BOE as global rate-cut standoff looms in 2023 policy finale

Disclaimer: The views and recommendations above are those of individual analysts, experts and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.

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Published: 11 Dec 2023, 03:03 PM IST
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