US Federal Reserve considers final interest rate hike to tackle inflation

Image courtesy of Bangkok Post

The US Federal Reserve has commenced a two-day meeting to determine if it will raise its benchmark lending rate for possibly the last time in this campaign, in an effort to tackle persistent inflation. Since March of last year, the Fed has embarked on a bold series of interest-rate hikes to address inflation, which currently stands at 5%, significantly higher than its long-term target of 2%.

Experts predict the Federal Open Market Committee (FOMC) will increase its base rate by another 0.25% today. Analysts will be closely watching for any revisions to the FOMC’s forward guidance about future rate changes. As Goldman Sachs’ chief US economist David Mericle mentioned in a recent note, “We expect the committee to signal that it anticipates pausing in June but retains a hawkish bias.”

Futures traders also anticipate this move, with over a 95% chance that the Fed will raise its benchmark rate by 25 basis points, as per data from CME Group. Such an increase would push the interest rate to 5-5.25%, the highest level since before the global financial crisis.

The FOMC meeting occurs shortly after one of the largest US bank failures, with the Monday collapse of First Republic following closely on the heels of Silicon Valley Bank’s demise. Despite this, most analysts still believe the Fed will proceed with a 0.25% hike today. JPMorgan has agreed to acquire First Republic in a deal announced on Monday, with CEO Jamie Dimon expressing his belief that the acquisition will stabilise the system.

However, not all analysts are convinced the Fed will clearly indicate future plans for pausing or continuing its aggressive rate hike strategy. With inflation remaining high, Deutsche Bank economists noted in a recent client update that “we expect the committee to maintain a tightening bias and repeat the language from March,” reports Bangkok Post.

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Alex Morgan

Alex is a 42-year-old former corporate executive and business consultant with a degree in business administration. Boasting over 15 years of experience working in various industries, including technology, finance, and marketing, Alex has acquired in-depth knowledge about business strategies, management principles, and market trends. In recent years, Alex has transitioned into writing business articles and providing expert commentary on business-related issues. Fluent in English and proficient in data analysis, Alex strives to deliver well-researched and insightful content to readers, combining practical experience with a keen analytical eye to offer valuable perspectives on the ever-evolving business landscape.