Fed is expected to hike interest rates Wednesday, but inflation is the wild card for markets

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Fed is expected to hike interest rates Wednesday, but inflation is the wild card for markets

CNBC

  • The Federal Reserve is expected to raise interest rates by a quarter point Wednesday, but it will have to answer questions about how it can hike in a period of weakening inflation.
  • CPI inflation data is released at 8:30 a.m. ET, and it could show inflation remains at a depressed level.
  • Weak inflation has created doubts in the market that the Fed can hike two more times this year.

Sluggish inflation has made the Federal Reserve’s efforts to get interest rates back to normal levels a lot harder.

The Fed is expected to raise interest rates Wednesday by a quarter point, and it has forecast another rate hike for this year. But the recent slowdown in inflation has become a red flag for markets, which doubt the Fed’s ability to hike a second time before year end.

The Federal Open Market Committee is expected to raise the fed funds target rate to 1 to 1.25 percent.

Fed Chair Janet Yellen holds a post-meeting briefing and is expected to provide some more detail on the Fed’s $4.5 trillion balance sheet. The Fed hopes to begin shrinking that balance sheet this year by scaling back a program to replace Treasury and mortgage securities as they mature.

Inflation will already be top of mind for markets Wednesday, even before the Fed’s 2 p.m. statement. The consumer price index is released at 8:30 a.m. ET, as is the latest retail sales report. That CPI report is expected to show that May core inflation was running at an annual rate of 1.9…Read More & View Videos

Section 9

Lakeem Khodra
Lakeem Khodra
News Writer/Contributor at Tyranny News @lakeemk

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