US Federal Reserve expects to keep interest rates on hold, monitors trends in inflation acceleration - Monetary policy meeting on 27th and 28th

[Washington Current Affairs] The US Federal Reserve (FRB) will hold a Federal Open Market Committee (FOMC) meeting on the 27th and 28th to discuss monetary policy. At the previous meeting in September, the Bank decided to raise interest rates for the first time in about three years, but the policy rate is expected to remain unchanged this time. Although inflation has accelerated, with midterm elections coming up on the 3rd of next month, the Federal Reserve is taking a wait-and-see approach to determine price trends.

US monetary policy ``not prejudged'', no mention of additional interest rate hikes - Fed chair

The consumer price index (CPI) growth rate in September was 3.7% compared to the same period last year, the first increase in four months. Although the rate exceeded expectations due to high energy prices due to the chaotic US-Iran conflict, most economists in the market believe that there is "no urgency to raise interest rates continuously." Combined with the fact that multiple Fed officials expressed the view that ``we need to take time to make a decision'' (Deputy Chairman Jefferson), expectations for further interest rate hikes this month have been significantly reduced.

Fed Chairman George W. Warsh has warned that it is best not to say what the Fed will do at its meeting later this year, but further rate hikes are inevitable at some point in order to achieve price stability.

The Federal Reserve tends to avoid raising interest rates right before an election to avoid a backlash from the current administration. President Trump, who hopes to boost the economy and raise stock prices, has repeatedly called for interest rate cuts. If the Fed decides to raise interest rates before the midterm elections, there is a risk that tensions with the administration will further escalate, so markets are betting that further tightening will be the likely outcome at the December meeting after the elections.

On the other hand, there remains a risk that rising transportation costs due to high energy prices will be passed on to product prices, leading to widespread inflationary pressures. Hammack, president of the Federal Reserve Bank of Cleveland, who is known as a ``hawk'' who is active in raising interest rates, argues that ``smaller and relatively quick adjustments are preferable'' so that policy responses do not fall behind due to wait-and-see measures. Opinions regarding monetary policy within the Federal Reserve remain divided.