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- Fed faces challenging policy meeting as rising energy prices fuel inflation and complicate its next move, while Fed Chair Kevin Warsh's cautious statements reinforce expectations of no rate change this week, though experts remain divided
By Sevgi Ceren Gokkoyun, Dilara Zengin Okay and Emir Yildirim
WASHINGTON / NEW YORK / ISTANBUL (AA) - The US Federal Reserve (Fed) is likely to hold interest rates steady at its upcoming monetary policy meeting this week, but accelerating inflation keeps the possibility of a rate hike alive.
The Fed increased its policy rate by 25 basis points to a range of 3.75% to 4% last month, raising rates for the first time since 2023.
Price pressures in the country are mounting, as the Labor Department reported that the US consumer price index (CPI) rose 0.6% month-on-month and 3.7% year-on-year in September.
Core CPI, excluding food and energy, climbed 0.3% month-on-month and 2.6% year-on-year, revealing broad-based inflation.
Producer inflation jumped 1.3% from August and 6.3% year-on-year to its highest level since December 2022.
Despite elevated inflation, Fed Chair Kevin Warsh did not provide clear forward guidance during the recent International Monetary Fund (IMF) and World Bank meetings in Bangkok.
Combined with cautious remarks from Fed Vice Chairs Philip Jefferson and Michelle Bowman, his statements have reinforced market expectations that the Fed will wait for more data before acting.
According to CME Group, there is a 90% probability that the Fed will hold rates steady this week, while 10% of traders expect an immediate hike.
Steven Kamin, a senior fellow at the American Enterprise Institute, told Anadolu that policymakers will wait for more data to be released this week, while a rate hike in December is probable given the persistently low unemployment rate.
Satyam Panday, chief US economist at S&P Global, disagreed and instead forecast an immediate 25-basis-point hike in October, while expecting an additional 50 basis points of tightening in the current cycle amid sticky core inflation.
Panday noted that despite the upcoming US midterm elections, the Fed will operate independently under a strict inflation-targeting mandate and will not hesitate to hike rates near an election if the data demands it.
ING economists James Knightley, Padhraic Garvey and Chris Turner recently published an article predicting that any Fed decision to hold rates will likely face internal opposition, as officials who previously favored tightening, such as Beth Hammack, Neel Kashkari and Lorie Logan, may dissent.
Sevgi Ceren Gökkoyun,Dilara Zengin Okay
