US Fed Meeting Expectations: No Rate Cut Expected In July FOMC, What’s Next?

US Fed Meeting: As the central bank gears up for its July FOMC meeting, expectations are high but straightforward that the policy rate will remain unchanged. However, the market participants are abuzz with speculation about potential rate cuts in September. So, let’s take a quick tour of what the July meeting might reveal and see its potential implications for future policy changes.

US Fed Meeting In July: What To Expect?

The Federal Reserve is expected to maintain the current interest rate in its upcoming meeting. According to the CME FedWatch Tool, there is a 95.9% chance that the central bank will keep the policy rates untouched at their upcoming gathering this week.

Meanwhile, the decision to hold rates steady reflects the US Fed’s cautious approach amid varying economic signals. However, market participants are not just focused on the present. They are looking ahead to September, with 87.7% anticipating a 25 basis point cut, the CME FedWatch Tool showed.

In addition, Federal Reserve Chair Jerome Powell’s remarks are crucial in this context. Many anticipate Powell to provide dovish comments, hinting at a rate cut in the near future. The Jackson Hole Symposium at the end of August could be a pivotal moment.

For context, the US Fed will have additional data on inflation and the broader economy by their September gathering. It could help the officials to determine the current inflationary pressures and their stance on the policy rates.

Meanwhile, discussions within the FOMC are likely to be robust. The central debate centers on how proactive the Fed should be. Powell’s viewpoint, suggesting a shift in the balance of risks towards favoring rate cuts to ensure economic stability, will be under scrutiny.

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Potential Market Impact

The global financial market, along with the cryptocurrency sector, is not just passively waiting for the July decision but also speculating on future moves. The consensus is clear: the Fed is poised to cut rates in September, with more reductions potentially following in November and December. This outlook is driven by a blend of economic indicators and the US Fed’s signaling.

Meanwhile, a significant factor is the upcoming economic data. By the time of the Jackson Hole meeting, new data on inflation and other economic metrics will be available.

This information will be critical for the Fed’s decision-making process. The expectation is that these data points will support the case for a rate cut in September. Moreover, the market’s anticipation of dovish remarks from Powell underscores the importance of communication in monetary policy.

However, despite the soaring optimism, if the inflation data comes in hotter than anticipated, the US Fed may reverse its dovish stance. In addition, this week’s Job data will also be watched closely by the investors for potential cues on the economic health.

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