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The Federal Reserve is set to cut interest rates again at its first meeting of the year this week, amid mounting signs that high inflation is finally starting to slow.

The U.S. central bank is widely expected to raise the federal funds rate by 25 basis points at the end of its two-day meeting on Wednesday – the lowest rate increase for the second straight meeting.

The move would keep the federal funds rate at 4.5% to 4.75%, further limiting economic activity as the cost of borrowing for homes, cars and other goods rises. It shows the highest speed rating since 2007.

Jerome Powell, chairman of the federation The central bank confirmed in December that smaller rate hikes are on the table this year, amid signs that the central bank’s aggressive stimulus campaign is slowing the economy and keeping inflation under control. However, he said policymakers have more work to do on the inflation front before pausing to hike, and that the rate could remain elevated for “some time”.

In the year After the government spending in 2023, the US is facing the threat of congestion

Federal Reserve Chairman Jerome Powell

Federal Reserve Chairman Jerome Powell speaks during a news conference on interest rates, the economy and monetary policy actions at the Federal Reserve Building in Washington, DC on June 15, 2022. (Photo by Olivier DOULIERY/AFP via Getty Images/Getty Images)

“Our focus now is on moving our policy stance to a more restrictive stance to ensure that inflation returns to our 2% target over time,” Powell told reporters. “It’s not about deflation. And we think we should have a restrictive policy stance for a while.”

Policymakers forecast a 5% rate hike in December.

But Wall Street The Fed is laser-focused on Powell’s press conference for more clues about what’s to come in the Fed’s rate hike.

If policymakers expect rates to remain high through 2023 and into next year, it could come as a shock to markets that are currently betting that rates will be cut in the second half of the year. Investors may be more pessimistic: Although the latest data showed the consumer price index fell 0.1% in December, headline inflation was three times the pre-pandemic average and well above the Fed’s 2% target.

Food prices are rising.

On January 12, 2023, customers shop at a store in Queens, New York, United States. ((Photo by Zhu Julian Zhu/Xinhua via Getty Images) / Getty Images)

Democrats slam ‘dangerous’ rate hikes, warn of widespread job losses

“Chairman Powell said he would not consider cutting rates until the committee is confident that inflation is sustainably falling to 2%,” said Jeffrey Roach, chief economist at LLL Financial. “The markets expect the Fed to cut rates in early July. Who is right? I want guidance on who is right about the potential rate cuts in this debate.”

Officials have made clear in talks over the past month that they expect to see further rate hikes and raise borrowing costs until there is sufficient evidence that inflation has eased.

Philadelphia Fed president Patrick Harker said last week, “I expect we’ll raise a few more times this year, but in my mind, the days of raising 75 points at a time are gone.” “A 25 basis point increase would be reasonable going forward.”

Federal Reserve

Pedestrians walk near the Treasury building in Washington, DC, on December 30, 2022. (Photographer: Ting Shen/Bloomberg via Getty Images/Getty Images)

The meeting was held against the backdrop of a slowing economy and fears of a recession. Demand is weakening among consumers, gross domestic product is softening and the housing market is definitely on the brink of recession.

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There are also signs that the labor market is beginning to slow, with the economy adding just 223,000 jobs in December, the smallest gain in two years.

“As inflation continues to decline convincingly, I expect the Fed will finally start the conversation about both of their dual missions,” Roach said. “The Fed cannot ignore the fact that the economy is slowing and the risks of a recession are increasing.”

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