US Fed Meeting Starts Today: 3 Key Things That Could Influence Fed Interest Rate Decision and More

US Fed meeting starts today: the market does not expect any surprises from the US Federal Reserve in terms of rate adjustments, but all attention remains focused on the rate decision interest from the Federal Open Market Committee (FOMC) scheduled for Wednesday, March 20.

Most analysts expect the Federal Reserve to align monetary policy with macroeconomic data, suggesting the central bank may not provide a clear timeline for rate cuts. However, many observers expect that rate cuts could begin as early as June.

Also read: The Federal Reserve meets at the center of attention: will the Fed give clear signals on rate cuts? The best experts intervene

“We expect the Fed to begin cutting rates by the second half of the year. However, available data on inflation and employment numbers will be the key to deciding when the rate cycle can reverse ” said Mukesh Kochar, National Head of Wealth at Active Capital Under Management.

Experts highlight the following three key elements that will influence the Fed’s interest rate decision

1. Inflation trajectory: The U.S. Consumer Price Index (CPI) rose 3.2% in February from a year earlier, slightly above market expectations for a 3.1% increase.

Read also: US inflation rises to 3.2%, dampening hopes of a Fed interest rate cut until June

For the second consecutive month, inflation exceeded expectations. As inflation consistently exceeds the Fed’s 2 percent target, it will be interesting to watch how the central bank assesses the trajectory of price increases.

Also read: US inflation undermines rate cut hopes; What will move the market now? Here’s what 5 experts say

2. Economic growth: Inflation is not the only factor determining the Fed’s policy decision. The central bank must also consider the repercussions of the rate hikes initiated two years ago. The Fed is expected to assess the effects of a prolonged period of high interest rates on the economy before making adjustments to its policy approach.

Read also: The American economy escaped a hard landing

3. Labor market conditions: The US labor market remains tight, but some signs of weakening have started to appear.

According to a Wall Street Journal (WSJ) report, “The Conference Board’s Employment Trends Index fell to 112.29 in February from a downwardly revised 113.18 in January.”

“Nevertheless, indications remain that the jobs market is still relatively strong. The latest data adds to Labor Department figures released last week that showed the U.S. added 275,000 jobs last month, more than expected,” according to the WSJ report.

The Fed has worked diligently to stabilize the labor market as part of its efforts to combat inflation. Investors will closely follow Fed Chairman Jerome Powell’s press conference after Wednesday’s policy meeting to understand how the central bank interprets the latest labor market indicators.

Expert Opinions on the Fed Meeting

Mukesh Kochar, National Head of Wealth at AUM Capital

We expect the Fed to hold rates. The last-minute release and various data points suggest a clear case for now.

The last two inflation data points have been slightly higher than expected, and various statements from Fed officials suggest they want to wait longer until they have assurances that inflation will head toward 2 percent.

It is important to look at the guidance the Fed gives at this meeting for the rest of the year.

Sharad Chandra Shukla, Director at Mehta Equities

Recent US inflation figures remain above the Fed’s target.

According to our analysis, the US Federal Reserve should keep its benchmark interest rate unchanged. However, the market’s focus will be on the Fed Chairman’s comments on the state of the economy and the inflation outlook.

We believe rate cuts would begin sometime in the second half of 2024. Fed officials had said three cuts were expected during 2024.

Indian markets have already priced in the status quo approach at the upcoming meeting, shifting focus to the Fed’s comment.

Japan’s central bank raised interest rates for the first time in 17 years. We believe this decision would have a negative impact on Japanese stocks as well as significant implications on global financial markets, leading to higher volatility.

The American central bank will take this measure into account in its decision-making process.

Trivesh D, COO, Tradejini

The upcoming Federal Reserve policy meeting is a key event, especially ahead of the crucial Lok Sabha elections in India.

A stable government after the elections could attract foreign investment and strengthen the rupee, which could influence the Fed’s interest rate decision.

Beyond domestic U.S. data such as inflation and growth, the Fed will watch global factors such as the rupee-dollar exchange rate and crude oil prices.

The Federal Reserve’s monetary policy decisions are influenced by a variety of factors, including economic growth, inflation, labor market conditions, and developments in the global economy.

The Fed’s dual mandate to promote maximum employment and price stability also plays a key role in shaping its policy decisions. Additionally, the Fed takes into account financial stability considerations and the impact of its policies on the financial system as a whole.

Inflation is also a key factor, and the Fed aims to keep inflation at or below its target rate of 2 percent.

The outcome of the meeting will impact global financial markets, attracting investors from around the world. The interplay between Fed policy and the Indian political landscape adds another dimension of intrigue.

Abhishek Jain, Head of Research, Arihant Capital

Although no decline is anticipated, the market is eagerly awaiting the outcome of the FOMC meeting and, more importantly, the language used by Fed Chairman Jerome Powell during his press conference.

Analysts are particularly interested in any indications regarding future policy.

The main factors influencing the Fed’s decision are twofold: inflation and the future policy trajectory.

Inflation remains above the Fed’s 2 percent target, with February CPI data beating expectations at 3.2 percent.

The market is looking for clues about the possibility of a rate cut starting in June, which would depend on the Fed’s assessment of progress in controlling inflation.

Disclaimer: The above views and recommendations are those of individual analysts, experts and brokerage firms, and not of Mint. We advise investors to consult certified experts before making any investment decisions.