Will the Fed and BOE stay put on interest rates this week?

Fed funds futures currently price in a 97.4% chance of no change. Then on Thursday, the Bank of England (BoE) is also set to stay put on rates. Governor Andrew Bailey and other top BOE members have been saying until recently that a rate cut would be premature. They also warned about the risks from strong wage growth, as IGTV’s Angela Barnes explains.

(AI Video Summary)

The Federal Reserve

The Federal Reserve, which is basically the central bank of the United States, is most likely going to keep its key interest rates the same for the fourth time in a row. This means they won't be changing how much it costs to borrow money. However, there is a good chance (around 59.7%) that when they meet in March, they might actually lower the rates by a little bit, like 0.25%. The goal of all this is to make sure the US economy grows in a nice and steady way, not too fast or too slow. They expect the economy to grow by about 1.4% in 2024 and they want the unemployment rate to be around 4.1%.

At the same time, the Federal Reserve plans to shrink its balance sheet, which is basically the total amount of money and assets they have, by selling some of the things they own. Right now, they're selling up to $95 billion worth of stuff every month, but they still have a long way to go to get back to where they were before the pandemic, which was around $4.15 trillion in February 2020.

The Bank of England

Now, let's talk about the Bank of England (BOE), which is the central bank of the United Kingdom. They're also probably going to keep their interest rates the same for now. The top people at the bank, like Governor Andrew Bailey, have said it's too early to lower the rates. They're worried that if they do, it might lead to some problems because the wages people are getting paid are going up too quickly. However, the recent data on things like how prices are going up, how much people are getting paid, and how the economy is doing, has been not as good as they expected. So they might change their minds and decide to lower the rates after all.

In short, the Federal Reserve is going to keep interest rates the same and wants the US economy to keep growing in a nice way. The Bank of England is also not planning to change interest rates, but if the economy keeps underperforming, they might change their minds.