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US Fed to provide fresh clues on rate cuts after uptick in inflation

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Fed Chair Jerome Powell says it needs to see more data before deciding if to cut interest rates. (Photo: AFP/Mandel Ngan) - 



VOInews, Washington, U.S : The US Federal Reserve is widely expected to keep its key lending rate unchanged again on Wednesday (Mar 20), as policymakers continue discussions over when to start rate cuts and launch the next phase in their long-running battle against inflation.

The Fed has raised interest rates to a 23-year high of between 5.25 and 5.50 per cent as it looks to return inflation firmly to its long-term target of 2 per cent.

After making significant progress against rising prices last year, 2024 has been more challenging, with the US seeing a small uptick in the pace of monthly inflation.

At the same time, the unemployment rate has remained low, wage growth has eased, and economic growth for the final quarter of 2023 came in above expectations – all indications that the US economy remains in good health despite higher rates.

After two days of discussions, the Fed will publish an updated summary of economic projections (SEP) alongside its rate decision on Wednesday, which will include policymakers' views of where they expect interest rates to be at the end of this year.

"The pace of disinflation, the slowdown in employment growth, [is] not happening as fast as we thought it did a few months ago," Wells Fargo senior economist Michael Pugliese told AFP. "And so they're gonna fine-tune their policy outlook accordingly."

In recent weeks, officials at the US central bank - led by Fed chair Jerome Powell - have urged caution about cutting interest rates too quickly, and have instead said they will follow a "data-dependent" path.

"The economic outlook is uncertain, and ongoing progress toward our 2 per cent inflation objective is not assured," Powell told lawmakers in Washington earlier this month.

He later confirmed that he still expects cuts to begin this year.

Futures traders currently assign a probability of around 55 per cent that the Fed will start cutting interest rates by Jun 12, according to data from CME Group.

This marks a significant shift from the run-up to the Fed's last rate decision in January, when traders were still widely anticipating the first would come in May//CNA-VOI

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