The Federal Open Market Committee (FOMC) is scheduled to meet today, June 14, 2023. The main focus of the meeting will be on interest rates.
Markets are expecting the Fed to raise rates by 0.50%, which would be the third consecutive rate hike. However, there is a growing possibility that the Fed could pause the rate hiking cycle at this meeting.
The decision to pause the rate hiking cycle would likely be based on two factors: (1) the recent slowdown in economic growth, and (2) the risk of a recession.
The US economy has slowed down in recent months. GDP growth in the first quarter of 2023 was only 1.5%, which was below expectations. Additionally, the labor market is showing signs of weakness. The unemployment rate is still low, but job growth has slowed down.
The Fed is concerned about the risk of a recession. A recession is defined as two consecutive quarters of negative GDP growth. The Fed is trying to avoid a recession, but it is also trying to bring inflation under control.
If the Fed decides to pause the rate hiking cycle, it would be a significant change in policy. The Fed has been raising rates aggressively in an effort to combat inflation. However, the Fed is now facing a difficult trade-off. It can either continue to raise rates and risk a recession, or it can pause the rate hiking cycle and risk higher inflation.
The more important part will be the speak of Jerome Powell 30 minutes after the rate hike announcement. Powell will likely provide more details about the Fed’s plans for the future.
Investors will be closely watching the FOMC meeting tomorrow. The decision to pause the rate hiking cycle would likely lead to a sell-off in stocks. However, if the Fed decides to continue raising rates, it could lead to a rally in stocks.
The FOMC meeting is a major event for the markets. Investors will be closely watching the meeting and Powell’s press conference for any clues about the Fed’s future plans.
