The Federal Reserve is set to deliberate another interest rate hike starting May 2 after inflation edged upward once more.
The increase would bring the Fed’s total number of adjustments since early 2022 to 10, representing one of the most aggressive disinflationary strategies in the nation’s history. Over the last year, consumer prices have also grown steadily, a trend which continued in March despite some positive economic signs. Given the banking institution’s anti-inflation doctrine, it is unlikely that the committee’s meeting will fail to produce another rate hike.
However, where analysts remain uncertain is whether the Fed will decide to freeze interest rates following the adjustment in response to economic factors. During March, the Reserve temporarily refrained from introducing another rate hike, seemingly in response to the sudden failure of several banks spurred by the unexpected collapse of California’s Silicon Valley Bank. While the closures had seemed to slow down, last weekend saw the failure of yet another financial institution, as the government seized First Republic Bank, promptly selling it to JP Morgan. This development could again push the Fed to adopt a less forceful stance on fiscal policy to avoid creating more instability, although it is unlikely to deter the committee from introducing more disinflationary measures this week.
Instead, analysts believe Chair Jerome Powell will hint at the possibility of pausing interest rate hikes when he shares the Federal Reserve’s conclusions after their meeting. Derek Tang, an economist at the LHMeyer consulting firm, sees Powell using the possibility of a freeze as leverage to move the needle on inflation. “He wants to kind of tell the market, “Don’t relax. Don’t be complacent. We could still hike more if we think we need to, but we don’t know if we have to yet,” he said. The Fed is expected to finish its deliberations on May 3, after which the public will hear directly from Powell on the results.