Going into this week’s two-day policy meeting, which wraps Wednesday afternoon in Washington, investors are assigning roughly even odds to the prospect that the US central bank will start lowering borrowing costs at its next decision in March.
That makes Fed Chair Jerome Powell’s press conference, and any signal he may or may not choose to send, of critical importance. It all comes down to how Powell and his colleagues have been reading the recent spate of economic data.
On one hand, inflation numbers continue to surprise to the downside. The Fed’s preferred gauge decelerated to 2.9% in December, crossing below 3% for the first time since early 2021, according to data published Friday.
On the other, consumer spending continues to be surprisingly robust. It’s undoubtedly getting a boost from the downdraft in inflation, but the strength still may keep some worried that price pressures could mount once again.
What Bloomberg Economics Says:
“The stage is set for the Fed to take steps toward cutting rates in coming months. We expect the Fed to begin lowering the federal funds rate target range in March as it attempts to stick a soft landing.”
