Market consensus is nearly unanimous (97%) for the Federal Open Market Committee (FOMC) to raise the federal funds target range today by 25 bp to 5.25%-5.50%. The markets will await today’s policy announcement and any signals from policymakers that today’s rate hike is the last for the current rate hike cycle. Since last month’s FOMC meeting, mixed U.S. economic data and a slowing of price pressures may push the FOMC to signal a pause in its rate hike campaign and say it needs more time to assess the economy’s progress.
The FOMC’s median estimate in its quarterly summary of economic projections in June showed two more 25 bp rate increases expected this year. In today’s press conference following the FOMC meeting, Fed Chair Powell may signal that the FOMC will “skip” a hike in the following meeting in September. However, if economic news over the next couple of months shows the economy weakening and if price pressures continue to fade, the FOMC may decide to keep rates on an extended pause for the rest of the year.
