Investors expect the Federal Reserve to hold US interest rates steady when it meets on Wednesday, as policymakers continue to monitor the effect of the Iran war on the world’s biggest economy.
The US central bank will again emphasise its dual mandate of pursuing maximum employment and low inflation and chair Jay Powell is expected to “highlight the resilience of the economy as a point in favour of keeping rates on hold”, Thomas Simons at Jefferies wrote to clients.
The market’s view of Fed policy has see-sawed during the Iran war. Before the US-Israeli attack, traders on futures markets were pricing two or three quarter-point rate cuts this year. As oil prices surged, they began to see the Fed as more likely to raise rates than to cut. They have since U-turned again and are now pricing a roughly 50 per cent chance that it will make one cut by the middle of next year.