The Federal Reserve (Fed) must say “that its confidence in the return of inflation to 2% has diminished”, according to Nancy Vanden Houten, economist at Oxford Economics, cited by AFP.
Prudence is expected to dominate the US central bank meeting that begins today and ends on Wednesday, with analysts expecting interest rates to remain high for longer.
The Federal Reserve (Fed) must say “that its confidence in the return of inflation to 2% has diminished”, according to Nancy Vanden Houten, economist at Oxford Economics, cited by AFP.
According to the economist, the Fed must be “prepared to maintain interest rates at current levels until it sees clear signs of a return to disinflation”.
Markets, which until a few weeks ago were hoping to see interest rates fall in June, are now pointing to September or even November, according to CME Group estimates.
“Given the dynamics of the economy and prices, we do not believe that the Fed will seriously consider easing monetary policy before its September meeting at the earliest,” reinforced Ben Ayers, economist at insurance company Nationwide.
“Currently, it is expected that the first cut will occur between the September and November meetings”, says a note from BPI bank.
The PCE price index, the most followed by the Fed, indicated last Friday that inflation in the United States accelerated to 2.7% in March, against 2.5% in February, further away from the 2% objective set by the North American central bank.
Signs that inflation, which slowed at the end of last year, was now accelerating led Fed Chairman Jerome Powell to change his tone, warning that “recent data (…) indicate that more time is likely needed than expected. than expected to achieve confidence” regarding the decline in inflation to 2%.
Since July, the Fed’s main interest rate has remained between 5.25% and 5.50%, the highest level in more than 20 years.
At the end of the meeting on March 19 and 20, Fed leaders indicated that they maintained their forecast of making three rate cuts throughout 2024, but this possibility now seems more remote.
