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US Fed convenes amid sticky inflation: What to expect?

Get insights into the US Federal Reserve's upcoming policy meeting amid concerns of rising inflation and sluggish economic growth from experts' perspectives.

US Fed convenes amid sticky inflation: What to expect?

US Fed convenes amid sticky inflation: What to expect?

The US Fed meeting this week is crucial for the market. No rate cut is expected this time due to high inflation, which is above the Fed's target. Cutting rates prematurely could worsen inflation, especially with unpredictable commodity prices due to global tensions.

Recent data from the Labour Department's Bureau of Labour Statistics showed the US Consumer Price Index (CPI) rose by 0.4% monthly and 3.5% annually, exceeding street expectations. However, GDP growth slowed to 1.6% annually, the slowest in two years.

Experts suggest the Fed will likely maintain its current stance, considering the elevated inflation rate of 3.7%, well above the Fed's comfort level. Despite keeping interest rates high for the past 10 months, inflation hasn't fallen below the Fed's target. There are concerns about stagflation, where inflation persists despite an economic slowdown.

The Fed's decisions are based on various factors like inflation, employment, economic growth, and global developments, driven by its dual mandate of price stability and maximum employment. Inflation is a critical factor, with the Fed aiming to keep it around 2%.

The Fed's approach is data-driven, considering rising oil prices, inflation, and slow GDP growth. It also monitors commodity prices and supply chain disruptions, which could impact economic activity. Economic stimulus is another aspect closely watched by the Fed to support growth.

Inflation has consistently remained above the 2% target due to rising commodity prices amid geopolitical tensions. No rate cuts are expected in the short term, although earlier projections suggested three cuts for CY24. The number of cuts will depend on inflation data. Financial markets are closely monitoring these developments.

The Fed's decisions consider economic indicators like GDP growth, inflation, unemployment, and consumer spending. It aims for stable inflation and maximum employment, monitoring financial market dynamics and global trends to fulfil its mandate.

Vineela Sekhar
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