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| The Federal Reserve's decision on interest rates is expected to cause disagreement, which will be discussed during the meeting |
The Federal Reserve's decision on interest rates is expected to cause disagreement, which will be discussed during the meeting
Most economists surveyed by Bloomberg anticipate that the Federal Reserve will hold off on interest rate increases at their upcoming meeting, the first pause in 15 months. This decision is likely to keep monetary policy unchanged until December, even as high inflation levels put pressure on the US economy.
The Federal Open Market Committee is expected to keep interest rates at 5%-5.25% when it meets on June 13-14, according to economists surveyed by Bloomberg.
Chairman Jerome Powell indicated last month that he would prefer to pause the tightening campaign in order to observe the delayed effects of past moves and how bank failures may affect credit availability.
What is the next date after this one?
The economists from Nomura Securities, Ichi Amamiya, Jeremy Schwartz, and Jacob Meyer expected that the Federal Open Market Committee would not raise interest rates at their June meeting, but instead indicate that an additional increase could come in September.
The Federal Open Market Committee suggested that the last hike in interest rates during this cycle would be in May due to decreasing inflationary pressure, worsening business conditions, and declining lending operations. These factors could lead to the FOMC resuming rate hikes at a later time.
Due to the bankruptcies of Silicon Valley and Signature Banks in March, credit has become more restricted. This has caused Federal Reserve leaders to be uncertain about the state of the economy and how they should respond.
The Federal Reserve is aiming for an inflation rate of 2% in the Personal Consumption Expenditures Price Index. Last April, the index saw an unexpected increase of 4.4%. In the past year, it has been generally stable.
Experts have different opinions
Economists are divided on whether the Federal Reserve will increase interest rates again in July. Some bank officials have spoken in favor of raising rates, including St. Louis' James Bullard and Cleveland's Loretta Mester, with some even suggesting skipping the June meeting and voting for a rate hike at the July meeting.
Kathy Postgancic, chief economist at Nationwide Life Insurance, stated that the Federal Reserve's recent guidance has led to confusion in the markets. Because of this and stronger-than-expected economic data, FOMC officials have suggested canceling the June meeting; however, they are still likely to tighten monetary policy in July.
The Federal Reserve leaders expect interest rates to gradually increase until the end of 2024, as they are predicted to reach 4.4% by the end of 2020 due to inflation returning to its target level.
Approximately 40% of economists anticipate that there will be differences of opinion during the meeting, which would be a departure from the Bank's mostly united vote in recent years with Powell as chairman. It is expected that Minneapolis Bank President Neel Kashkari, Dallas Bank President Lori Logan, and Board of Governors member Christopher Waller -- supporters of continuing monetary policy tightening and increasing interest rates -- may disagree most strongly with pausing hikes.
James Smith, an economic forecaster from "Econ Forexster," believes that the US economy is doing well and inflation rates are decreasing quickly.
The value of gold increases as the US dollar weakens and people await the Federal Reserve's decision on interest rates
Gold prices increased on Monday due to a weakening of the US dollar. Investors are awaiting key economic data and indications of the Federal Reserve's monetary policy during its meetings this week.
The price of gold for immediate transactions increased by 0.2% to $1,963.90 per ounce at 0921 GMT. US gold futures also rose by 0.1% to $1,979.70.
The US dollar weakened by 0.2 percent, making gold more affordable for those holding other currencies. Data on US inflation in May is to be released on Tuesday and the Federal Reserve's meeting will begin on the same day. According to a Reuters survey, inflation rates dropped from 0.4 percent in April to 0.2 percent in May.
Non-yielding metal is becoming more attractive as interest rates decline. Silver prices dropped 0.2% to $24.21 per ounce in spot trading, while platinum prices decreased by the same amount to $1006.75. On the other hand, palladium rose 0.4%, to $1,328.28, after reaching its lowest level since May 2019 on Friday.
Bank of America predicts that US interest rates will increase to 6% by 2024
Bank of America economists predict that the US Federal Reserve's interest rate could reach 6% in the coming year. This is due to the Fed wanting to lower inflation, which currently stands above 2%.
Analysts from the American Bank have suggested that if interest rates go up, unemployment could increase by 4% or more, leading to a recession in the coming year. The effect of this could be a significant economic slowdown.
Rabobank, a Dutch investment bank, recently released a note outlining their expectations for the decisions of the US Federal Reserve. They anticipate that the Federal Open Market Committee will maintain its current target range for interest rates this month.
The Federal Reserve of the United States is expected to increase interest rates by 0.25%, and then take a break until the end of 2020.