The Federal Open Market Committee (FOMC) is meeting today and tomorrow to discuss the economy and set monetary policy. The most likely outcome of this meeting is to leave the target rate for fed funds unchanged at 5.50%, indicating a slowing of rate hikes rather than a pause. The next likely rate hike is to be expected for November 1, 2023.
Despite the Fed’s efforts to control inflation, recent CPI data shows a concerning trend with annualized rates of 3.0%, 3.2%, and 3.7% for June, July, and August, respectively. The Fed hopes that signs of recession in the markets will reduce inflation without causing a severe economic downturn, but this may be a risky strategy. In the past, inflation and recession have occurred simultaneously, as seen in the late 1970s and early 1980s.
Additionally, rising crude oil prices, which have increased by 21% in the past two months, could further contribute to inflationary pressures when they eventually reach consumers at the petrol stations.
I am monitoring the Fed’s announcement and press conference and will be monitoring closely Fed Chief Powell’s comments for insights to conclude what the Fed’s next move will be and how it will impact the economy.