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US Federal Reserve likely to lift interest rates to 22-year high

Future traders see a probability of close to 99 per cent that the Fed will proceed with a quarter-percentage-point hike

Published: Wed 26 Jul 2023, 4:26 PM

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Photo: AFP

Photo: AFP

The US Federal Reserve is poised to announce a fresh quarter-percentage-point hike to its benchmark lending rate on Wednesday to tackle inflation while keeping the option open for more such moves in the coming months.

The Fed last month halted its aggressive campaign of monetary tightening after 10 consecutive rate increases to give policymakers more time to assess the health of the world's largest economy.

At the June meeting, members of the rate-setting Federal Open Market Committee (FOMC) nevertheless indicated they see possibly two additional interest rate hikes this year.

"The forecast is for the Federal Open Market Committee to hike the target range for the fed funds rate by 25bps but maintain a bias toward additional rate hikes, if needed," Oxford Economics' chief, US economist Ryan Sweet wrote in a note to clients.

A rate hike on Wednesday, the 11th since the US central bank launched its cycle of monetary tightening in March last year, would raise the Fed's benchmark lending rate to a range between 5.25 and 5.5 per cent — its highest level in 22 years.

Future traders see a probability of close to 99 per cent that the Fed will proceed with a quarter-percentage-point hike, according to data from CME Group.

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