Market participants do not expect a change in the Fed rate at the next meeting

The meeting of the US Federal Reserve System starts on Wednesday, and it is assumed that the base interest rate will remain unchanged. 

Most experts and investors believe that the rate will remain at the level of 5.25-5.5% per year – the highest in the last 22 years. Despite this, market participants also do not expect that the Fed leadership and Jerome Powell will announce the end of the monetary policy tightening cycle.

Given current inflation, which is still above the 2% target and has been accelerating in the last two months, analysts believe that maintaining the rate will give the Fed an opportunity to analyze further economic dynamics. And also – the impact of the previous tightening of policy on the US economy of the country. 

Moreover, leading figures of the Central Bank expressed concerns about the risks associated with further tightening of the PREP, which may affect decisions at the next meeting scheduled for October 31-November 1.

According to futures on the rate level, the chances of its increase by 25 bps at the next meeting are estimated at 31%. However, many economists still think that the Fed has not yet completed tightening. Most of the analysts surveyed expect further rate changes in the future: about half of respondents predict that the rate will peak at 5.5-5.75%, that is, it will be raised once by 25 bp, another 35% of respondents expect two increases of 25 bp, up to 5.75-6%, and 8% believe that the rate will exceed 6%.

In addition, Powell is expected to confirm earlier statements at a meeting in Jackson Hole. At the same time, his current comments may give signals regarding the future course of monetary policy.

Also, a key moment for investors will be the publication of a new schedule of forecasts for rates (dot plot), which reflects the individual expectations of the Fed leadership.