empty
 
 
26.01.2023 04:08 PM
Fresh data on US inflation could determine the path of the Fed

This image is no longer relevant

Before the Fed holds its first committee meeting for this year, a report on core PCE will be released, which will definitely have an impact on the decisions the central bank will take regarding monetary policy. Forecasts say the figure will continue to fall, from 4.7% y/y in November to 4.4% y/y in December.

Inflation has been falling steadily in the US, thanks to the Fed's extremely aggressive monetary policy. The bank has kept the base rate between 0 and a quarter percentage point for a long time in an attempt to lower inflation, which spiraled in 2021 and rapidly approached a 40-year high.

This image is no longer relevant

At first, the Fed raised interest rates by a quarter percentage point, which is the first increase since 2018. It was followed by a series of more aggressive rate hikes, which determined the second half of 2022. The bank only reduced the pace of hikes from December awards.

Many assume that the Fed will continue this cycle, but at its meeting next week announce a gradual slow down of interest rate hikes. This is in line with the estimates of the CME FedWatch tool, which says there is a 98.1% chance that the FOMC will raise rates by 25 basis points. Is said there is only a 1.9% chance that the bank will take a more aggressive stance of raising rates by 50 basis points.

Meanwhile, the Fed itself forecasts that the base rate will rise above 5% and not lower for the whole year and possibly the first or second quarter of 2024. This raises many questions, the most important of which is whether the bank will maintain such an aggressive monetary policy despite recent data indicating that inflation in both the US and worldwide has already peaked and is falling every month. Global inflation hit a six-month low in December, but back then, the Fed said it is unlikely to change its hawkish stance.

Irina Yanina,
Analytical expert of InstaForex
© 2007-2023
EURUSD
Euro vs US Dollar
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Start trade
Start trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST
  • Chancy Deposit
    Deposit your account with $3,000 and get $8000 more!
    In March we raffle $8000 within the Chancy Deposit campaign!
    Get a chance to win by depositing $3,000 to a trading account. Having fulfilled this condition, you become a campaign participant.
    JOIN CONTEST
  • Trade Wise, Win Device
    Top up your account with at least $500, sign up for the contest, and get a chance to win mobile devices.
    JOIN CONTEST
  • 100% Bonus
    Your unique opportunity to get a 100% bonus on your deposit
    GET BONUS
  • 55% Bonus
    Apply for a 55% bonus on your every deposit
    GET BONUS
  • 30% Bonus
    Receive a 30% bonus every time you top up your account
    GET BONUS

Recommended Stories

Dollar dips as the Fed announces a less aggressive policy stance

The Fed had been raising its key interest rate by a quarter percentage point. However, it has changed tactics, most likely because it is preparing for a pause

Irina Yanina 03:23 2023-03-24 UTC+2

EUR/USD. The Fed is at the finish line: the results of the March FOMC meeting broke the dollar

The results of the Fed meeting in March were not in favor of the greenback, although the central bank implemented the base case by raising the rate by 25 points

Irina Manzenko 03:08 2023-03-24 UTC+2

How will central banks continue to fight inflation?

In a previous article, I tried to figure out what to expect from central banks in 2023 and concluded that we can expect 2-3 more rate hikes from each

Chin Zhao 02:53 2023-03-24 UTC+2

The meetings of the ECB, the Bank of England, and the Fed are over. What conclusions can be drawn?

The market has been anticipating the central bank meetings in March for a while, and in recent weeks, analysts and market participants have been actively arguing about how much this

Chin Zhao 18:44 2023-03-23 UTC+2

EUR/USD: Bullish rally slows down

The banking crisis has done some of the work for the Fed. Even Jerome Powell admitted that the series of bankruptcies has the same effect on the economy as raising

Marek Petkovich 15:30 2023-03-23 UTC+2

Australian dollar found its place in Forex

The stronger the system, the more opportunities the central bank has to raise rates. The stronger its currency. In this regard, the Australian dollar looks attractive. Australian banks are well

Marek Petkovich 13:37 2023-03-23 UTC+2

Fed now has less work to do, says Fed Chairman Powell

U.S. Federal Reserve Chairman Jerome Powell stressed Wednesday that the Fed may now have less work to do. During the press conference, Powell leaned towards a dovish stance

Irina Yanina 11:41 2023-03-23 UTC+2

ECB stands firm on its position

Euro rose as market players were pleased over the Fed's interest rate decision yesterday and statements made by ECB officials. The latter is increasingly convinced that the eurozone banking system

Jakub Novak 11:38 2023-03-23 UTC+2

Fed will continue to pursue its inflation target

Dollar slipped a lot after the Fed announced its decision on interest rates. Although the accompanying statement was very much about how the recent turmoil will not change the committee's

Jakub Novak 11:15 2023-03-23 UTC+2

Jerome Powell fails to persuade investors

Yesterday, the Federal Reserve increased interest rates for the ninth time in a row. In its statement, the FOMC noted that further rate hikes were not out of the question

Jakub Novak 09:08 2023-03-23 UTC+2
Can't speak right now?
Ask your question in the chat.