WASHINGTON (NEWSnet/AP) — With inflation now edging closer to the Federal Reserve’s 2% target, expectations are increasing that a cut in interest rates will happen - just not yet.
Such a move would reduce borrowing costs across the economy, making mortgages, auto loans and business borrowing less expensive. Stock prices could rise, too, though share prices have already risen in expectation of cuts, potentially limiting any further rise.
Fed Chair Jerome Powell, though, has recently downplayed the chatter that rate reductions are near. With the central bank poised to keep its key short-term rate unchanged when it meets this week, Powell hasn’t yet signaled that the Fed is conclusively done with its hikes.
But the Fed’s two-day meeting that ends Wednesday will mark the third straight time that its officials have kept their key rate unchanged, lending weight to the widespread assumption that rate hikes are over.
The economy, after all, is headed in the direction the Fed wants:
- The November inflation report is expected to show that annual consumer price increases slowed to 3.1%, according to a survey of economists by FactSet.
- Job openings have declined, which means less pressure to sharply raise wages, which can accelerate inflation.
- And consumers are still spending, though more modestly.
Copyright 2023 NEWSnet and The Associated Press. All rights reserved.