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Tuesday, June 17, 2025

US Federal Reserve widely expected to hold interest rates

تم إعداد هذا المنشور من قبل فيجاي فاليتشا

US Federal Reserve widely expected to hold...

Vijay Valecha, June 17, 2025, Khaleej Times

The US Federal Reserve is expected to hold rates steady on Wednesday, maintaining the federal funds target range at 4.25 per cent to 4.5 per cent. According to the CME FedWatch Tool, there is a 99.8 per cent implied probability that the Fed will stay on pause this week, reinforcing consensus around a cautious, data-dependent policy stance.

The UAE Central Bank is also likely to follow suit, maintaining its overnight deposit facility (ODF) at 4.40 per cent. The UAE follows US monetary as the UAE dirham is pegged to the US dollar.

Bond futures traders see about a 66 per cent chance of a cut happening then, according to data from the CME FedWatch Tool, while they see a 94 per cent chance that the Fed cuts at least twice by year-end. “The shift in expectations reflects growing confidence that inflation is cooling sustainably alongside a resilient but moderating labour market,” Vijay Valecha, Chief Investment Officer, Century Financial, told Khaleej Times.
Right now, monthly government data shows that inflation is cooling while the labour market remains relatively healthy. The CPI report released last week showed slower price growth than economists expected in May, and May employment data showed healthy job creation in the US economy. “Chair Powell is expected to reiterate the Fed’s wait-and-see approach, emphasizing the need for sustained evidence of easing inflation and ensuring policy remains restrictive enough to bring inflation to target without derailing the labour market,” Valecha said.

The upcoming meeting will primarily be about the Fed’s revised economic projections and the dot plot, which will be updated for the first time since March. It could offer forward guidance on the number and timing of potential cuts in 2025. In March, the median dot still reflected two cuts for this year, but the last set of projections was released before Trump’s market-moving tariff announcement on April 2. At the time, the FOMC was expecting two rate cuts in 2025. Since then, sticky inflation, the shock of tariff hikes, and other potential changes in policy and regulation from the Trump administration have upended the outlook. Market participants are watching to see whether that median will slip to one or be affirmed to two, quarter‑point moves.

“Markets will be closely analysing the tone of the press conference, changes to the dot plot, and commentary around the inflation trajectory, tariffs, and labour market resilience for clues on the likely pace of easing ahead,” Valecha said.

Source:

Khaleej Times

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