Fed Expected to Keep Rates Unchanged in May But Pick Pace in 2018

The U.S. Federal Reserve is set to hold interest rates steady this week but will likely further encourage expectations that it will lift borrowing costs in June on the back of rising inflation and low unemployment.



Investors have all but priced out the chance of a rate hike at the end of the Fed’s two-day policy meeting on Wednesday, particularly given its adherence in recent years to only raising rates at meetings that are followed by press conferences.

The central bank is due to announce its decision at 2 p.m. EDT (1800 GMT) on Wednesday. Fed Chairman Jerome Powell is not scheduled to hold a press conference.

“Fed speakers have done little to push back against this expectation … we expect no fireworks,” JPMorgan economist Michael Feroli said in a note to clients.

The Fed raised its benchmark overnight lending rate at its March 20-21 meeting by a quarter percentage point to a target range of between 1.50 percent and 1.75 percent.

It currently forecasts another two rate rises this year, although an increasing number of policymakers see three as possible. The Fed’s next policy meeting after this week is scheduled for June 12-13. Investors overwhelmingly see a rate hike then.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza