This week’s Federal Reserve (Fed) meeting is not expected to be a blockbuster, but it will shed further light on a central bank that continues with gradual tightening even as it sends a clear message that above-target inflation remains acceptable.
Fed Funds Futures currently suggest a 47.6% chance of four rate hikes this year. We’ve already had one, so at present three more would carry the interest rate to 2.5%. US growth was 2.3% for the first quarter (Q1) according to initial reports, and while this is slightly weaker, it remains above the trend. As a result, the Federal Open Market Committee (FOMC) can stick to its optimistic view of the situation overall. Core inflation has strengthened as well, breaking above the 2% level for the first time since early 2017.