After the Bank of Canada and the European Central Bank reduced interest rates by 25 basis points, the markets are now awaiting the reaction of the US Federal Reserve. The Fed is set to announce its decision on interest rates today at 10:00 pm Dubai time. Currently, US interest rates are at their highest level in 23 years, at 5.5%.
Recent job data, which showed an increase to 280K jobs and exceeded expectations, indicates continued inflationary pressures. This suggests that the US economy is not slowing down as the Fed hopes, which is necessary to achieve a continuous decline in inflation towards the target level of 2%.
Today's inflation data, which will be released at 4:30 pm Dubai time, will have a significant impact. It will influence not only the Fed's perspective on interest rates at its meeting but also its outlook on when it might begin a monetary easing policy. This is especially crucial with only four meetings remaining until the end of the current year.
Looking at the expected scenarios, if inflation remains above 3%, the Fed is likely to maintain its current policy and keep interest rates high for a longer period than the markets expect. Conversely, if inflation drops below 3%, we may anticipate a shift in the Fed's tone, potentially leading to an interest rate cut.
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The content published above has been prepared by CFI for informational purposes only and should not be considered as investment advice. Any view expressed does not constitute a personal recommendation or solicitation to buy or sell. The information provided does not have regard to the specific investment objectives, financial situation, and needs of any specific person who may receive it, and is not held out as independent investment research and may have been acted upon by persons connected with CFI. Market data is derived from independent sources believed to be reliable, however, CFI makes no guarantee of its accuracy or completeness, and accepts no responsibility for any consequence of its use by recipients.