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The president of the United States Federal Reserve, Jerome Powell, testifies to an audience of the Banking, Housing and Urban Affairs of the Senate on “The Semiannual Monetary Policy Report to Congress”, in Capitol Hill in Washington, USA. UU., February 11, 2025.
Craig Hudson | Reuters
Federal Reserve officials are expected to maintain stable interest rates, but adjust their views on the economy and possibly the future path for interest rates.
If the market price is correct, there is practically no possibility that the policy formulators of the Central Bank are the current level of its key interest rate, directed in a range between 4.25%-4.5%. Chair Jerome Powell And his colleagues in recent weeks have advocated a patient approach in which they do not need to be in a hurry to do anything.
However, they are also expected to abandon clues about where things go here in the uncertain context of President Donald TrumpCommercial and fiscal policies. That could include anything, from adjustments in projections for inflation and economic growth to what frequency, if they do, they hope to reduce interest rates even more.
“There is no possibility of a cut on Wednesday, so all other things become more important,” said Dan North, a senior economist of Allianz Trade North America. “Basically they will say: ‘You know what, now we are not in a hurry.'”
In fact, that has been Powell’s predominant message and his colleagues from the Federal Open Market Committee. In Speech earlier this month For economists in New York, Powell insisted on “there is no need to be in a hurry” since central bankers look for “greater clarity” about where the Trump administration is directed.
New perspectives for GDP, inflation, unemployment
The public, then, will stop carrying through the updates that the Fed makes to its quarterly projections on interest rates, gross domestic product, unemployment and inflation. According to recent data, the Fed could increase its 2025 perspective for inflation (in December, the perspective was 2.5% both in the nucleus and the holder) while reducing its GDP projection (2.1%). Powell will organize your press conference after the meeting.
On the question of the rate, the Federal Open Market Committee will use its “Point Plot” grid of the intentions of the individual members.
There is a significant disagreement about what could happen there. The committee could maintain its December perspective for two cuts, eliminate one or both, or, unlikely, add another as a declaration of concern for a possible deceleration. Everything seems to be on the table.
“I think it can be one or zero cuts this year, particularly if the rates adhere,” North said. “I don’t think they try to rescue the economy by reducing rates, because they know that if they fell inflation, they will have to return and start again.”
Economists care Trump rates It could revive inflation, particularly if the president becomes more aggressive after the White House published a global review of the tariff situation on April 2. If the Fed cares more about tariff inflation, it could become even more reluctant to cut.
Investors are right when worrying about the direction indicated by the FOMC, said Thierry Wizman, FX global strategist and Macquarie rates.
“That concern is supported by the suspicion that the Fed is no longer” in charge “, since it has resigned from the control of macroeconomic policy to the Trump administration,” Wizman wrote. “Given the current uncertainty, and the recent increase in inflation expectations, the Fed can have difficulty indicating three more speed cuts, or even two more. It could boost a speed cut in 2026, leaving only a cut in the medium ‘point’ by 2025.”
Markets still see two or three cuts
If the Fed decides to keep two cuts, it is likely that it is only “to avoid adding to the recent market turbulence,” said Goldman Economist Sachs David Mericle in a note.
Main averages of the stock market They are floating around correction Territory, or 10% decrease from the maximum.
In the past, underneath The idea of a “fed put” The markets have expected the Central Bank to facilitate policy in response to market disturbances. The operators do not expect an initial rate reduction to at least in June, and have a price at a percentage point of additional quarter that decrease and approximately 50-50 possibilities of a third movement for the end of the year, according to the CME group. Fedwatch Measurement of feeding funds prices.
But that could even be too ambitious, Wizman said.
“Indeed, the markets seem to have become too much in the Fed, and instead of pointing out their own confidence in their perspective, the Fed can issue signals of lack of trust.
The Committee could also address its “Quantitative Adjustment” program, where it is allowing an established income level of mature bonds to remove the balance every month. The markets expect that the Fed ends the program at the end of this year, and recent meetings have presented an argument on the best way to handle the portfolio of treasures and values supported by mortgages of the Central Bank.
