- The Federal Open Market Committee (FOMC) is expected to raise interest rates further in their July 26-27, 2023 meeting to tackle persistent inflation.
- Balancing inflation control with economic stability, the FOMC must consider various factors such as market volatility and the cooling housing market when deciding on the rate of the hike.
As the calendar approaches the dates of July 26-27, 2023, the economic world turns its eyes towards the forthcoming Federal Open Market Committee (FOMC) meeting. The key point on the agenda is monetary policy, and it is highly probable that we will witness another rise in interest rates.
Since March 2022, the Federal Reserve has been incrementally raising interest rates in a bid to restrain rampant inflation. The federal funds rate currently resides in the 5.00%-5.25% target range. It is widely speculated that the FOMC will choose to hike these rates by another 25 basis points in the upcoming July assembly.
Factors Impacting the Rate Hike Decision
Nonetheless, there are several elements that could potentially push the FOMC to adopt a more than 25 basis point rate increase at this July meeting. Inflation continues to hover at high levels, prompting the possibility of more drastic action from the Fed to keep it in check. Additionally, the economy is maintaining a robust growth rate, leading the Fed to consider avoiding the risk of a recession caused by a too-slow rate increase.
However, considerations that could dissuade the FOMC from an interest rate hike of more than 25 basis points also exist. The recent volatility experienced in the stock market might cause the Fed to err on the side of caution, wary of adding fuel to the fire with too quick a rate increase. Furthermore, with the housing market beginning to show signs of cooling, the Fed might prefer to gauge its evolution before committing to a more aggressive rate increase.
Hence, with multiple variables in play, the climate leading into the July FOMC meeting is suffused with uncertainty. A rate hike is indeed likely, but the exact magnitude of the increase is yet to be determined. Market participants and analysts alike will be attentively monitoring the meeting to discern the final decision of the FOMC.
