New economic forecasts from the Federal Reserve this week will show how far and how quickly policymakers expect to raise rates this year, in a first test of the impact of the war in Ukraine and the jump in inflation in the new monetary policy cycle that is approaching in the United States. United.
The Fed’s monetary policy-setting committee is expected to raise borrowing costs by 0.25 percentage point at the end of its two-day meeting on Wednesday, which will set the tone for the central bank’s reaction to the shock. of energy caused by the war, which is colliding with post-pandemic economic reopening and strong consumer demand.
The new quarterly economic forecasts, to be released along with the monetary policy statement on Wednesday, will show what policymakers anticipate in terms of key indicators such as GDP growth, inflation and unemployment.
In particular, the updated outlook will signal how aggressive they can be on raising rates and whether that could jeopardize a record low unemployment spell.
This week’s meeting “is complicated” by the need to respond quickly to inflation, now at a 40-year high, but also by the desire to contain prices without raising the unemployment rate, said Steve Englander, head of macro research for North America. North on Standard Chartered.
Englander said he expects the Fed to signal rate hikes totaling 1.25 to 1.50 percentage points higher this year, which is less than many investors currently expect.
The median of estimates by economists polled by Reuters also project that the Fed will raise rates from the current near-zero level to a range between 1.25% and 1.50% by the end of 2022, the equivalent of five 0-year hikes. 25 percentage point.
Investors in futures contracts tied to the Fed’s benchmark rate target currently expect the central bank to raise borrowing costs at a slightly faster pace, ending the year in a range of between 1.75% and 2.00%.
“Growth and unemployment should be revised down, while general inflation and its core should be revised up… We expect a hawkish message from Chair Jerome Powell, who will likely reiterate that the Fed needs take price stability seriously,” wrote analysts at BofA.
Source: CNN Brasil
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