The US central bank, Federal Reserve (Fed), raised the federal funds rate to 5.25% on May 3, 2023, after a quarter-point rate hike. Fed chair Jerome Powell highlighted that inflation was still a major concern, and the Fed’s goal was to bring down the current inflation rate of 4.9% to the target of 2%. Even with the rate hike, inflation has continued to rise, and the latest Consumer Price Index (CPI) report released on May 10 showed a 12-month increase of 4.9%.
Uncertainty Ahead of FOMC Meeting
The stock market and the crypto economy have been experiencing a downward trend while precious metals have traded sideways. The next Federal Open Market Committee (FOMC) meeting is expected to be a nail-biter, with the CME Fedwatch tool indicating a high probability that interest rates will remain unchanged at 5.25%. However, there is a slim chance of a quarter-point rate hike to 5.50%, with the Fedwatch tool showing a probability of roughly 15.5%.
Forbes journalist Simon Moore reports that most policymakers favor maintaining interest rates at the current level, according to the latest data from March. However, a few believe rates should be closer to 6%, and one participant predicts rates will not remain at their current level by the end of the year. The uncertainty around the central bank’s decision has left investors anxious.
President Joe Biden has made some significant changes to the Fed’s leadership, appointing Philip Jefferson as the new vice chair. Reports suggest that Jefferson is aligned with Powell’s efforts to curb inflation and is unlikely to push back against the Fed’s current policies. With fresh blood at the helm, many are wondering how this will impact the central bank’s policies and priorities moving forward.
In conclusion, the US central bank’s efforts to combat inflation have been challenging, with rates failing to curb the rise in inflation. As the next FOMC meeting approaches, investors are anxious about the interest rate decision. With changes in the Fed’s leadership, the market will be closely watching how the central bank’s policies and priorities evolve.