Federal meeting focused when investors seek tips on rate pass
By Lewis Krauskopf
NEW YORK (Reuters) – The balanced federal Reserve act between concerns about weakening the labour market and concerns about inflation that are still above target will be the central stage for investors next week as it hampers the risks to U.S. stock market gatherings.
The Benchmark S&P 500 has recovered sharply over the past two months as concerns eased over the impact of trade barriers on the economy since President Donald Trump’s “liberation day” announcement on April 2 brought markets to a surge.
Larry hit a stumbling block on Friday as Israel launched a military strike in Iran and Iran fired missiles accordingly, and stocks fell globally and investors moved to safe seafarer assets. The US major indexes fell above 1% on Friday, with the S&P 500 down 1.1%.
The Fed’s two-day monetary policy meeting could present the next major obstacle to the market: The US Central Bank is widely expected to stabilize interest rates when it announces its decision on Wednesday, but investors are eager to give tips on whether the Fed is poised to cut interest rates in the coming months.
The Fed’s funding rate has been 4.25%-4.50% since central banks were relaxed by a quarter point as the last relaxed in December.
“What the Fed is trying to do next week is to encourage the belief that they can actually act without committing anything,” said Drew Matus, chief market strategist at MetLife Investment Management. “If there is evidence that they can point out that they are too early before there is evidence that they can weaken, they actually increase the risk of further increasing expectations of inflation.”
At its final meeting in May, the central bank said the risk of both higher inflation and unemployment increased. The Fed has a double mission to maintain full employment and price stability, and investors will seek indications that it means a fee pathway if the authorities are more concerned about one of those goals.
One area focused on Wednesday is the latest update on Fed officials’ forecasts on monetary policy and the economy, last published in March.
Larry Werther, a US economist at Daiwa Capital Markets America, watches unemployment estimates. The final forecast for Fed officials was that the unemployment rate would end at 4.4% in 2025, but Werther projected a year-end rate of 4.6%, saying recent data, including unemployed claims, shows softening in the labor market.
“If unemployment is expected to be high, then simply adjust to what we see in the labour market and we are not expecting inflation to move far beyond what the Fed is projecting, we will open the door to further easing to support the labour market later this year,” Werther said.