On July 26, the US central bank, Federal Reserve, is set to make a significant decision regarding the interest rate, which will play a crucial role in shaping the market’s direction. The two-day meeting of the Federal Open Market Committee (FOMC) commenced on July 25, and the results will be disclosed late at night on July 26 (according to Indian time). Speculations are rife that the FOMC may raise the interest rate by a quarter of a percent (25 bps). This comes after the Federal Reserve refrained from increasing the interest rate in the previous June meeting, choosing to observe the impact of the banking crisis on the US economy.
US Federal Reserve’s Crucial Interest Rate Decision on July 26
Inflation in the US remains above the central bank’s 2 percent target, with labor market pressures adding to the situation. Despite inflation being above the target level, experts note that inflation is softening in the US. In June, inflation dropped to 3 percent from 4 percent in May, reaching below the 4 percent mark for the first time in two years. The core inflation rate has also decreased to 4.8 percent. This indicates that although the battle against inflation continues, there has been progress. Analysts believe that another interest rate hike could be on the cards before the central bank adopts a more accommodative stance.
Speculations: Will FOMC Raise Interest Rate by 25 bps?
Experts opine that Federal Reserve Chairman Jerome Powell may adopt a softer stance this time, considering the softening inflation. The markets are bullish, anticipating that the US central bank may adjust its policy direction by late 2023 or early 2024. A 25 percent interest rate hike may not have a significant impact on the market, as it has already been factored in. However, the potential softening of the central bank’s stance could provide further support to the ongoing market rally.
