(MENAFN) During its upcoming meetings next Tuesday and Wednesday, the US central bank, the Federal Reserve, is anticipated to adopt a cautious stance regarding high interest rates, particularly in light of the recent resurgence of inflation. Despite a slowdown in growth in the United States during the first quarter, inflationary pressures have prompted speculation about the Federal Reserve's response to economic conditions. Nancy Vanden Houten, an economist at Oxford Economics, anticipates that the Federal Reserve will express diminished confidence in achieving a sustainable return of inflation to the targeted 2 percent rate. Consequently, the central bank may opt to maintain interest rates at their current levels until clear indications of a downward trend in inflation emerge.
Previously, market expectations suggested a possibility of interest rate cuts as early as June. However, experts now project that such adjustments may be postponed until September or even November, according to estimates from the financial services group CME. This shift in sentiment is attributed to the acceleration of inflation, which has risen from a sluggish pace in recent months to 2.7 percent annually in March, based on the personal consumption expenditures index favored by the Federal Reserve.
Additionally, another measure of inflation, the Consumer Price Index, which influences US pension determinations, also experienced an uptick last month, reaching 3.5 percent over the course of one year. This upward trajectory in inflation indicators has prompted Federal Reserve Chairman Jerome Powell to adjust his tone, acknowledging that it may take longer than initially anticipated to achieve a sustainable slowdown in inflation.
As the Federal Reserve grapples with these inflationary pressures and their implications for monetary policy, market observers remain attentive to the central bank's communications and decisions. The upcoming meetings are poised to provide valuable insights into the Federal Reserve's approach to managing interest rates amidst evolving economic conditions and inflation dynamics.
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