2023-05-24 13:34:00
© Archyde.com Do the Federal Reserve’s minutes enhance the possibilities of raising US interest rates in June?
FXNEWSTODAY – Today, Wednesday, global financial markets are awaiting the release of the minutes of the last monetary policy meeting of the Federal Reserve, with the aim of obtaining a clearer vision regarding the future of the cycle of raising interest rates on federal funds in 2023.
And following more aggressive comments this week from some Federal Reserve officials, chances are now 33% that the US central bank will raise interest rates by 25 basis points in June.
Therefore, it is likely that if the Federal Reserve’s minutes today include more hawkish comments than expected, the prospects for raising US interest rates next month will become stronger.
By 18:00 GMT, the Federal Reserve will publish details of the meeting held on May 2-3.
In line with expectations, the Federal Reserve raised interest rates by 25 basis points, at the same pace for the third consecutive meeting, bringing the benchmark interest rate to a range of 5.00% to 5.25%, the highest level since August of 2007, that is, before the outbreak. The global financial crisis.
In the monetary policy statement, the Federal Reserve confirmed that it remains very concerned regarding the risks of inflation, which remains high, and indicated that economic activity in the United States expanded at a modest pace during the first quarter of this year, and recent months witnessed a strong increase in the number of jobs available, and the rate remained stable. Unemployment is low.
In its statement, the US Central Bank deleted the phrase that was mentioned in its previous meeting (that “some” further monetary tightening “may” be appropriate to achieve the inflation target), and only said that it would monitor the incoming data to determine whether there is a need to adjust the position of monetary policy appropriately if risks arise. It may hinder the achievement of its goals by returning inflation to the target level of 2%.
The Federal Reserve also reaffirmed that the banking system in the United States is sound and resilient, and indicated that tighter credit conditions for households and companies are likely to affect economic activity, employment and inflation in the country.
Jerome Powell
Federal Reserve Chairman Jerome Powell said that price pressures remain a source of concern for the Federal Reserve Bank, and that without price stability we will not achieve a strong labor market in a sustainable manner, adding that there is still a long way to go before efforts to reduce inflation, and that it will not be easy.
Jerome Powell said that because of this, it is too early to say that the cycle of raising interest rates is over, we are ready to do more in this regard, and Powell indicated that the members of the Monetary Policy Committee did not make a decision regarding temporarily stopping interest rate hikes at the June meeting. Next, it cannot be said that we have reached a sufficient level in raising interest rates.
Jerome Powell added, the tightening credit conditions resulting from the pressures on the banking sector in the United States will negatively affect the American economy, and he ruled out the economy entering a state of recession and said he ruled out the occurrence of a recession, but if it did, it would be limited.
Federal Comments
Minneapolis Fed President Neel Kashkari said this week that US interest rates may have to move above the 6% range in order for inflation to return to its 2% target, and St. The central bank may still need to raise interest rates by another half point this year.
American interest
Because of these comments, futures pricing for the possibility of the Federal Reserve raising interest rates by 25 basis points at the next June 14 meeting rose from 13% a week ago to 33% at the present time, and futures pricing for the possibility of keeping interest rates without any Change from 87% to 67% now.
New pricing
The Fed’s minutes are expected to provide a fresh estimate of the odds of raising US interest rates by 25 basis points to a range of 5.50% at the June 13-14 meeting.
The more hawkish comments would raise those odds from 33% to above 70%, at least pending inflation data for May, due on the first day of the Fed’s meeting.
Less hawkish comments will reduce those possibilities from 33% to less than 10%, and then the upcoming inflation data will be decisive in the final interest rate decision during next month’s meeting.
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