Here’s Everything The Federal Reserve Is Expected To Do Today

Mariner S. on Wednesday, July 27, 2022 in Washington, DC. Construction workers outside the Eccles Federal Reserve Building.

Kent Nishimura | Los Angeles Times | Getty Images

There aren’t a lot of suspense surrounding Wednesday’s Federal Reserve meeting, with markets widely expected the central bank to approve a third three-quarter interest rate hike in a row.

That doesn’t mean there isn’t much intrigue, though.

whereas The Fed will almost certainly deliver There are plenty of other items that the market has ordered that will catch Wall Street’s attention.

Here’s a quick rundown of what to expect from the rate-setting Federal Open Market Committee meeting:

rates: In its continued quest to tackle runaway inflation, the Fed will almost certainly approve an increase of 0.75 percent that will push its benchmark rate to a target range of 3%-3.25%. This is the highest fed funds rate since the beginning of 2008. There is little potential for a full 1 percent increase in the market, something the Fed has never done since it began using the fed funds rate as its primary policy tool in 1990.

economic outlook: Fed officials will release their quarterly update of interest rate and economic outlook as part of this week’s meeting. While the Summary of Economic Projections is not an official forecast, it does provide insight into where policymakers look at various metrics and interest rates. The SEP includes estimates of GDP, unemployment and inflation, as measured by the Personal Consumption Expenditure Price Index.

I just want the Fed to hike and end it, says Ed Yardenik

“Dot Plot” and “Terminal Rate”: Investors will most closely be watching the so-called dot plot of individual members’ rate projections for the years 2022 and beyond, with this version of the meeting first expanded into 2025. Included in this would be a projection for the “terminal rate,” or the point where officials think they can stop raising rates, which may be the most market-moving event of the meeting. In June, the committee raised the terminal rate. Placed at 3.8%; it is likely to be at least half a percentage point higher after this week’s meeting.

powell presser: Fed Chairman Jerome Powell After the conclusion of the two-day meeting, we will hold our general news conference. In his most notable remarks since the last meeting in July, Powell given a short, clear address The Fed’s annual Jackson Hole, Wyoming, symposium in late August stressed its commitment to reducing inflation, and specifically emphasized their willingness to inflict “some pain” on the economy by doing so.

new Kids on the Block: A minor wrinkle at this meeting is the input of three relatively new members: Governor Michael S. Bar and Regional President Laurie Logan of Dallas and Susan Collins of Boston. Collins and Barr attended the last meeting in July, but this will be their first sep and dot plot. Although individual names are not linked to the projections, it will be interesting to see if the new members are on board with the direction of Fed policy.

big picture

Put it all together, and what investors will be watching most closely will be the tone of the meeting — specifically how far the Fed is willing to go to tackle inflation and whether it will be doing too much and pushing the economy into a sharp recession. Worried about leaving.

judging by recent market action And the commentary, hopefully, is for a staunchly hard line.

“Fighting inflation is a task,” said Eric Winograd, senior economist at AllianceBernstein. “The consequences of not fighting inflation are greater than the consequences of not fighting it. If it means a recession, it means it.”

Vinograd expects Powell and the Fed to stick to the Jackson Hole script that financial and economic stability is entirely dependent on price stability.

In recent days, the markets have started to leave Confident that the Fed will only increase through this year Then possibly start cutting by early or mid 2023.

“If inflation is really stubborn and remains high, they may have to gnash their teeth and go into recession for a while,” said Bill English, a Yale School of Management professor and former senior Fed economist. “It’s a very difficult time to be a central banker right now, and they will do their best. But it’s tough.”

The Fed has met some of its targets toward consolidating financial conditions, with stocks retreating, housing market slump To the point of a recession and Treasury yields are rising to higher levels not seen since the early days of the financial crisis. Household net worth fell more than 4% to $143.8 trillion in the second quarter, mainly due to a decline in valuations of stock market holdings, according to fed data was released earlier in September.

Although labor market remains strong And workers’ wages continue to rise, raising concerns over a wage-price spiral despite the cost of petrol at the pump. In recent days, both Morgan Stanley and Goldman Sachs acknowledged that the Fed may have to raise rates in 2023 to bring down prices.

English said, “The kind of door the Fed is trying to go through is where they slow things down to bring down inflation, but not so much that they cause a recession and I think it’s going to be narrower.” It is done.” There is a similar scenario where inflation remains very high and the Fed has to keep rising, which he said is “a very bad choice down the road.”

Fed will accept recession in the name of fighting inflation

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