Federal Meeting Expectations and Anticipated Market Impacts

It is widely expected that the Federal Reserve, in its meeting scheduled for today,
March 20, 2024, will maintain the key lending rate unchanged.
In this context, committee members continue to discuss strategies to curb and combat inflation,
focusing on the timing of interest rate cuts and the implementation of the next phase of monetary policy.

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The Federal Reserve had taken significant steps to raise interest rates to their highest levels in 23 years,
between 5.25% and 5.50%, aiming to return to the targeted 2% inflation rate.
Despite progress made in fighting inflation last year, increased challenges have been highlighted by inflation data,
making the committee’s upcoming estimates crucial.

The consumer price inflation rate will be crucial in the next meeting,
as Federal Reserve members will discuss the possibility of reducing interest rates,
in addition to determining the number of possible cuts in the current monetary policy.

However, we do not expect a significant change,
although some analysts speculate a reduction in the anticipated number of interest rate cuts this year.
Decision-makers are expected to lower their expectations for interest rate cuts more than they expect to raise interest rates again.

Moreover, the Federal Reserve’s upcoming decision on interest rates is eagerly awaited,
and Federal Reserve Chairman Jerome Powell’s statement on monetary policy will be a key focus for investors’ future guidance.

Following the European Central Bank’s recent decision, the Federal Reserve is expected to commit to not changing interest rates,
barring any unforeseen developments.

It is highly likely that the Federal Reserve will postpone interest rate hikes in the next meeting,
as expectations indicate a relative increase in probability from last week, now at 100%.

Here’s what different asset classes might indicate about what Powell might say:

Two-year U.S. yields: An increase indicates the market’s impatience with a prolonged period of high-interest rates.
EUR/USD currency pair: A more dovish outlook and potential interest rate cuts could weaken the U.S. dollar.
Small company stocks: An increase in the Russell 2000 index may indicate expectations for an interest rate cut.

However, it’s important not to assume anything, as Federal interest rate cuts in 2024 are not guaranteed.

Federal Meeting Expectations and Anticipated Market Impacts

Federal Meeting Expectations and Anticipated Market Impacts

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