(Washington) The American Federal Reserve (Fed) began its two-day meeting on Tuesday during which it should decide to maintain its rates in their current range, even if its president, Jerome Powell, judges inflation still “too high “.
The meeting of the monetary policy committee (FOMC) “started at 10 a.m. as planned,” a Fed spokesperson told AFP. It will end at midday on Wednesday with Mr. Powell’s traditional press conference.
The decision will be announced Wednesday at 2 p.m. in a press release. However, it should cause few surprises, as almost all market players predict that the Fed will extend its pause in rate increases, the third pause in four meetings.
Overnight rates are currently located in a range between 5.25% and 5.50% since the meeting at the end of July, after eleven increases since March 2022. This very rapid rate of increase in credit prices is justified by the desire to prevent inflation from becoming anchored in market and consumer expectations.
Inflation has slowed sharply since its peak, reached in July 2022 at 9.5% and stood at 3.4% over one year in September, stable for three months, according to the PCE index, which is favored by the Fed.
There is still a way to go to bring it back to the long-term target of 2.0% targeted by the Fed, and Jerome Powell judged in mid-October that it remained “still too high”. “A few months of good numbers are just the beginning of what it will take to be sure that inflation falls sustainably,” he said.
But, he warned, “the path may be strewn with pitfalls and take time”.
The mantra repeated by the majority of Fed members is now “higher, longer,” but some analysts fear that rates held high for too long could end up having a serious impact on the U.S. economy, which is has so far shown to be particularly resilient.
GDP growth more than doubled in the third quarter, to 4.9% annualized, and the unemployment rate remains stubbornly low, at 3.8%.
But yields on 10-year Treasury bonds, which serve as a benchmark, soared in September and October, flirting with 5%, and remain very high, at 4.81%.
However, this increase in yields represents a risk for the financial markets and increases the cost of credit, particularly property loans.
30-year loans, the most common in the United States, reached 7.79% on October 26, according to data from the real estate refinancing group Freddie Mae, the highest since September 2000.