WASHINGTON: The US Federal Reserve is widely expected to start cutting interest rates in the coming months, as inflation edges closer to its long-run target of two percent.
What is less clear, however, is when the first of those cuts will come.
While the US central bank is almost certain to announce it is holding its key lending rate steady at its next rate decision on Wednesday, analysts think it could also drop some more hints that cuts are coming.
In economic forecasts published alongside the last Fed decision, policymakers indicated that they expect as many as three quarter percentage-point rate cuts this year – although they did not indicate when they might begin.
During a press conference after the rate decision was announced, Fed Chair Jerome Powell said policymakers had even discussed when it would be “appropriate” for the Fed to begin cutting interest rates, without providing any additional details.
Divisions have opened up between analysts and traders who believe the Fed’s rate-setting committee will start cutting rates in March, and those who think a move later in the year would make more sense.
“If we are right on our outlook for a rate cut in March, it is likely because a majority of participants focus on more aggregated measures of inflation than specific components,” Bank of America economists wrote in a recent investor note.
US Fed official ‘encouraged’ by progress against inflation
Meanwhile, Wells Fargo chief economist Jay Bryson told AFP Friday that recent inflation data is keeping hopes of a March cut “live,” but added: “I still think that’s a little bit premature.”
“There may be some members who are willing to contemplate rate cuts as soon as March, I just don’t think you can get a supermajority to agree to that,” he said in an interview.
Recent economic data showed that growth in the United States reached 2.5 percent in the year to December, underscoring the enduring, unexpected strength of the world’s biggest economy.