On Wednesday, the Fed is expected to leave interest rates unchanged as it continues to closely watch the impact from feeble global demand but may look to signal to markets it is determined to continue to tighten policies this year. The Federal Reserve has kept its overnight lending rate for banks at a target ranging from 0.25 to 0.50% since it lifted the benchmark interest rates in December for the fist time in nearly a decade. From the time of the rate hike the Fed has indicated more caution, though the U.S economy relative strength, as worries a slowing China would push down global growth ignited sharp stock price falls and tighter financial market conditions earlier in 2016.
Fed official’s met on Wednesday morning as scheduled for the second day of the two-day meeting, a Fed spokesperson noted. A policy decision statement is set to be announced at 2 p.m. EDT (1800 GMT). Federal Reserve Chair Janet Yellen is not scheduled to hold a press conference. Next, markets have rallied since the last rate meeting in March. The S&P 500 has increased more than 14% since February. China’s economy has been showing signs of optimism, increasing at a 6.7% rate in 1Q.
Also, some of the concerns that have kept inflation down than the Fed would like have decreased. Oil prices have rebounded, with the Brent benchmark crude [LC0c1] seeing 20 percent gains to a near $44 a barrel since the Fed’s December rate hike, while the dollar has fallen close to 4 percent versus a basket of currencies.
The Fed may also recognize the recent improved market signals by lowering or easing its March warning that global economic and financial developments “continue to pose risks.” “If anything, Fed officials will likely want to encourage markets to price in more tightening than is being priced in currently,” stated Jim O’Sullivan, an economist at High Frequency Economics. Lastly, Investors right now see a very little chance the Fed will raise rates at this week’s meeting and see a 23 percent chance of a rate increase in June, noted by the CME Group.