Markets Wait as Fed Decides on Interest Rates
(MENAFN) Poised on the edge of uncertainty about the US central bank’s next move on borrowing costs, worldwide financial arenas are holding their collective breath until Wednesday’s announcement.
Whether policymakers will lower the benchmark remains undecided, as continuing trade skirmishes muddy the outlook.
Derivative markets largely indicate the first possible reduction will not arrive before September, and commentators have offered a spectrum of interpretations.
James Knightley, chief international economist at ING Group, told a news agency that the Fed is expected to keep its policy rate unchanged.
He observed that the US economy shrank 0.2 percent in the opening quarter, hiring momentum slowed, and price growth became more subdued—factors that could justify a rate trim.
According to Knightley, weaker activity stemmed from tariffs prompting businesses to cut back on imports to dodge extra costs.
Knightley added that underlying domestic appetite stayed firm and that a 4 percent expansion in gross domestic product might materialize in the second quarter once import flows normalize.
“The Fed remains in wait and see mode, but we will be closely watching their updated forecasts for indications as to what they might do later in the year,” he said.
“The market is currently pricing two rate cuts for September and December, so there appears little pressure for the Fed to change their forecast from what they published three months ago of 50 basis points of cuts this year and 50 basis points in 2026.”
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