The U.S. Federal Reserve is anticipated to decrease interest rates on Wednesday as officials work through economic data gaps caused by the government shutdown and competing economic risk assessments.
The anticipated quarter-percentage-point cut may come with a non-committal or even hawkish approach to next year’s rate path due to policymakers’ division between those skeptical about the need for more rate reductions in the face of still-high inflation and those who believe the economy and job market may weaken if the U.S. central bank doesn’t lower borrowing costs.
The estimates made this week may be short-lived. The 43-day shutdown delayed the release of a large amount of data, including November job and inflation reports, which could help central bankers resolve their core debate. This is another reason for the rate-setting Federal Open Market Committee to be circumspect as it lowers its policy rate to 3.50%-3.75%.
First-day policy meeting: “We expect the FOMC to deliver a 25-basis-point cut this week with decidedly more hawkish guidance,” TD Securities analysts stated. “The decision will likely be equally or more contentious than October’s.”