The U.S. Federal Reserve is largely expected to hold interest rates on Wednesday at the conclusion of its two-day policy meeting. The Fed faces firming inflation and concerns of a sluggish global economy, forcing policy makers to find a fine balance.
The central bank appeared cautious at its January policy meeting amidst a major financial market selloff, falling inflation and weak oil prices.
The Federal Reserve’s latest policy statement will be released Wednesday afternoon, and will include updated economic projections. The statement will give insight into the mindset of policy makers and the path of future rate hikes.
Janet Yellen, Fed Chair, will hold a press conference at 2:30 PM EDT.
The Fed refrained from characterizing potential risks to the U.S. economy and its policy outlook in January, as concerns continued to grow over slowing economies in Europe and China. Recent economic data, however, showed unexpected gains in job growth for the month of February. Inflation is also showing signs of stabilizing, and the unemployment rate was holding steady at 4.9%.
The European Central Bank made the decision to implement further monetary easing measures, which may give the Fed confidence that Europe will stymie its growth drag.
Provided the U.S. economy continues to grow and new jobs continue to be created at an adequate pace, analysts project that the policy-setting committee will likely raise rates later in the year.
Economic projections from the Fed’s policymakers will include projections of where the federal funds rate will be at the end of 2016, and forecasts for inflation, GDP growth and unemployment.
After the December policy meeting, policymakers projected four quarter-point hikes this year. Due to recent events in global markets, it’s more likely that the Fed will raise rates two or three times this year.
Tuesday’s Federal funds futures indicate that traders project a 50% chance of the Fed raising rates in June, and a much-higher 80% chance in December.