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PinnedFederal Reserve officials are expected to leave interest rates unchanged at their meeting on Wednesday, buying themselves more time to assess whether borrowing costs are high enough to weigh down the economy and wrestle inflation under control. Central bankers have already raised interest rates to a range of 5.25 to 5.5 percent, the highest level in 22 years. At least a few officials might stop expecting another quarter-point rate move this year, predicting instead that interest rates have already reached their peak. If, on the other hand, officials expect to lower rates by less in 2024, it could be a signal that policymakers expect inflation to prove more stubborn. Fed officials will release fresh economic forecasts.

Persons: Jerome H, Powell, ”, Antúlio Bomfim, Powell’s, “, William English Organizations: Federal Reserve, Fed, Trust Asset Management, United Auto Workers, Yale Locations: America, Panama

The U.S. economy has avoided a threatened banking crisis and financial markets have not only aligned with the Federal Reserve's tight-credit policies but of late even helped the process by bidding up market interest rates. "I think Powell’s main effort is going to be explaining to what degree you want to hold (interest rates) higher for longer in the current outlook." Investors in contracts tied to the Fed's benchmark interest rate currently expect the Fed to begin reducing the policy rate next year from the current level set between 5.25% and 5.5%. Fed officials in fact have begun discussing the possibility of rate cuts down the road, at least in the context of steadily falling inflation. If inflation does decline as expected, Fed officials including Powell have suggested rate reductions might be appropriate to maintain a roughly constant inflation-adjusted "real rate."

Persons: Jerome Powell, Jackson, Jim Urquhart, JACKSON, Antulio Bomfim, Powell, who've, isn't, Adam Posen, William English, Donald Kohn, Howard Schneider, Andrea Ricci Organizations: REUTERS, Federal, Kansas, Fed, Northern Trust, Bank of England's, Committee, Peterson Institute for International Economics, Yale School of Management, Brookings Institution, Thomson Locations: Teton, Jackson , Wyoming, U.S, , Wyoming, Washington

He called the U.S. central bank's misreading of the issue "a major failure" that can mar analysis of where the economy stands. Since 2016, policies from the vastly different Trump and Biden administrations have combined in a sort of accidental complementarity to keep both job and economic growth above the Fed's estimate of potential. Median Fed policymaker projections of potential U.S. economic growth have slid from a level around 2.5% a decade ago to 1.8% as of June 2023, when the last projections were issued. Under pressure from colleagues to raise interest rates as the economy accelerated, Greenspan resisted and accommodated the expansion instead of fighting it. But it could help economic growth continue even as prices cool, another prop for the "soft landing" the Fed hopes to engineer and possible evidence of rising potential.

Persons: John Williams, Joe Biden, Adam Posen, Donald Trump, Trump's, Biden, Dana Peterson, Peterson, Jerome Powell, Board's Peterson, Alan Greenspan's, Greenspan, Jackson, John Fernald, Huiyu Li, Michael Feroli, Antulio Bomfim, Powell, Howard Schneider, Paul Simao Organizations: Federal Reserve, New York Fed, San Francisco, Fed, Reuters, BlackRock, Bank of England, Peterson Institute for International Economics, Trump, Biden, Conference Board, Jackson, San Francisco Fed, JPMorgan, Trust Asset Management, Thomson Locations: U.S, Jackson Hole , Wyoming, Washington

The Fed last week raised its policy rate to the 5.25%-5.50% range, the 11th increase in the last 12 meetings. Core inflation is still pretty elevated," Powell said in a press conference after the end of the Fed's two-day policy meeting. We think we're going to need to hold policy at restrictive levels for some time. The Fed's policy rate influences the economy by changing what lenders charge consumers for credit card, auto, and home loans or what businesses pay on bonds or for credit lines. "Given that inflation is still sticky, they're going to end up with rates either too high or as high as they are for too long.

Persons: Antulio Bomfim, Bomfim, what's, Jerome Powell, Powell, Lindsay Owens, Thomas Simons, Howard Schneider, Dan Burns, Paul Simao Organizations: Trust Asset Management, Fed, Reuters Graphics Reuters, STAR, North Star, Open, Jefferies, Thomson Locations: U.S

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