What you need to know before the Fed's interest rate decision

While it is eagerly awaited whether the Fed will start rate cuts in the short term, the pressure on the institution in the US on this issue is also increasing. After Senator Elizabeth Warren gave the message that rate cuts should be started as soon as possible on Monday, the Chairman of the US Senate Banking Committee last night called on the Fed to cut interest rates early this year.

Will the interest rate cut be delayed?

Positive economic data from the US and the failure to realize expectations about cooling caused an increase in the dollar index. The U.S. dollar appreciated more than 2 percent against the other major currencies in the index. Experts say that statements from Fed branch presidents and managers that expectations about the pace and scale of rate cuts have decreased have caused this rise.

Powell was confused

As it will be remembered, interest rates were left unchanged at the December meeting, but chairman Powell strongly pronounced interest rate cuts for the first time in a long time. However, shortly after Powell's statement, many Fed branch presidents made statements in the opposite direction and stated that interest rate cuts were not expected in the short term. In his last press conference, Powell said that he did not discuss reductions with Fed members, but he thought that these discussions would start in a while.

Very little expectation of discounts

According to Fed Watch, an online source on the Chicago Stock Exchange that shows the Fed's future monetary policy prospects, interest rates will be left unchanged again tonight. The unchanged rate is 97.9%, while the 25 basis point discount rate is 2.1%. Interest rates in the US are currently in the 5.25-5.50% band.

## What did the dot-plot say?

The latest version of the dot-plot chart, which shows the expectations of the Fed members on the course of interest rates, was announced after the meeting in December. As it is known, although there are 8 Fed meetings a year, the dot-plot chart is announced 4 times.

In the latest announcement, Fed members show that they expect interest rates to fall below 5 percent in 2024. In 2025, interest rates are expected to fall further.

Published: January 31, 2024 11:35Last Updated: January 31, 2024 11:37