13-6-2023 (WASHINGTON) The Federal Reserve in the United States commenced a two-day meeting on Tuesday (Jun 13) to determine its benchmark lending rate, as indications of easing inflation raise the likelihood of a pause in its aggressive cycle of rate hikes.
In response to persistent inflation levels exceeding its long-term target of two percent, the Federal Reserve has implemented ten consecutive interest rate increases since March 2022.
However, several officials on the central bank’s rate-setting committee have expressed their inclination to forego a rate hike this month. They believe that additional time is needed to assess the economic impact of recent banking stress and the previous interest rate adjustments.
The Federal Open Market Committee (FOMC) meeting commenced at 10:30 am (10:30 pm, Singapore time), according to a statement released by the Federal Reserve. The FOMC’s decision will be disclosed, along with an updated economic forecast, on Wednesday at 2 pm.
Freshly published data earlier on Tuesday revealed that the consumer price index (CPI), a measure of inflation, moderated to an annual rate of 4.0 percent last month, marking its lowest level in nearly two years.
Excluding volatile food and energy prices, core CPI remained elevated at 5.3 percent.
Although the Federal Reserve’s preferred inflation gauge also continues to exceed its two percent target, there have been signs of deceleration in recent months.
Since March last year, the Federal Reserve has raised its benchmark lending rate by five percentage points, resulting in a range of 5.00 to 5.25 percent.
In the lead-up to this week’s FOMC meeting, there were differing views regarding the best course of action, with a minority of members indicating support for an 11th consecutive rate hike to combat inflation.
However, Tuesday’s subdued CPI figure may have alleviated some inflation concerns.
“The latest consumer price inflation data doesn’t change the Fed outlook for a June rate hike skip, but it illustrates the ‘should I stay, or should I go’ dilemma that the Fed faces when considering further rate increases,” noted EY chief economist Gregory Daco in a client memo.
Following the release of the CPI data, futures traders raised the probability of the FOMC voting to pause interest rate hikes this week to above 90 percent, according to CME Group.
