Analysts almost certainly expect the Fed to raise interest rates this week for the first time in more than three years and investors will focus on how the Fed plans to curb the inflation surge triggered by the Ukraine crisis without triggering an economic recession.
U.S. central bank is expected to at least increase borrowing costs at each of its next three policy meetings in order to address the fastest inflation in 40 years. Consumer prices rose 7.9% a year in February.
On the other hand, the labor market and the economy have begun to recover from the Covid-19 pandemic, with the Fed reducing risks in the economy. It should be noted, Western sanctions to punish Russia for its aggression on Ukraine have caused oil and other commodity prices to soar, adding to the uncertainty in the global economy.
Powell’s news conference after the end of Wednesday’s two -day policy meeting will be closely monitored for possible indications of how aggressive the Fed is in fighting inflation and whether it will run the risk of a recession to ease price pressures.
The Fed will also on Wednesday release an updated quarterly economic forecast. The market also expects the Fed to raise rates year -on -year more frequently and higher. According to Zachary Griffiths, a macro strategist at Wells Fargo, it will be interesting to see if any policymakers start revising their expectations for terminal rates in response to inflation expectations.
The new economic projections will show how policymakers see short -term easing of price pressures and the extent to which GDP growth expectations have been lowered.
