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Is the Fed done raising interest rates?

The Fed is widely expected to keep interest rates on hold at the end of its latest policy meeting on Wednesday.

Investors will be on the lookout for any clues whether this means the world’s most powerful central bank will no longer raise borrowing costs or simply pause its historic tightening campaign again.

Fed policymakers said they expect to keep interest rates at current levels, in a range of 5.25% to 5.5%, at the two-day meeting. Previously, interest rates were raised by 0.25 percentage points in July.

Fed officials are trying to lower inflation without tipping the economy into recession, a so-called soft landing. Although inflation has fallen from a peak of more than 9% last summer to below 4% now, concerns about a reacceleration of price increases are still growing.

Gasoline costs pushed up consumer prices in August, even as core inflation, which strips out the volatile food and energy sectors, continued to slow, according to data this week. U.S. retail sales also rose more than expected in August as rising gasoline prices overshadowed sluggish spending in other parts of the economy, the Commerce Department reported on Thursday.

Top Fed officials, including Dallas Fed President Lori Logan and New York Fed President John Williams, have said they do not expect to raise interest rates in September but have stopped short of suggesting the fight against inflation is over. .

Oscar Munoz, chief U.S. macro strategist at TD Securities, said, “We expect the committee to continue to shift to ‘higher, longer’ information.” Munoz added that the Fed Chairman Powell’s press conference and a slew of new rate forecasts from the central bank’s rate-setting committee “are likely to have a hawkish tone, as Fed officials are unlikely to completely close the door to further rate hikes.” Kate Duguid

Will the Bank of England raise interest rates again?

Investors are preparing for an important week in the UK economic calendar, with August inflation data due a day before the Bank of England’s interest rate decision.

Despite growing signs of economic weakness, the Bank of England is widely expected to raise interest rates for the 15th consecutive time on Thursday, which would take the benchmark rate to 5.5%.

That could change if official data on Wednesday shows British inflation falling sharply, but economists polled by Reuters forecast headline inflation would accelerate to 7% last month after a recent surge in petrol prices. They expect core inflation, which excludes food and energy prices, to remain at July’s 6.8% level.

Following this week’s dovish rate hike by the European Central Bank, traders will be closely watching statements from the Bank of England’s Monetary Policy Committee at the time of the rate decision for signs of the end of the tightening cycle.

In addition to Thursday’s interest rate decision, the Bank of England will announce how much gilts it plans to sell from its asset purchase facility in the next financial year as part of its so-called quantitative tightening programme.

Barclays expects the BoE to increase sales to £100 billion this financial year from £80 billion. Mary McDougall

Will the People’s Bank of China loosen monetary policy?

As China’s economic data begins to show signs of improvement, all eyes will be on China’s benchmark interest rate announcement on Wednesday for the next important signpost in the trajectory of the world’s second-largest economy.

The median forecast among economists surveyed by Bloomberg predicted that the benchmark one-year loan prime rate would remain unchanged, as would the five-year loan prime rate that underpins China’s mortgage rates.

Becky Liu, head of China macro strategy at Standard Chartered, said the timing of the People’s Bank of China’s recent cut in the reserve requirement ratio for Chinese banks “suggests that the People’s Bank of China is likely to maintain bold monetary policy easing for the remainder of the year” . Year”.

“We do not rule out the possibility of lowering the prime rate on one- and five-year loans next week,” she added. “These developments could lead to an overall decline in interest rates in China.”

Others are less optimistic about the possibility of a rate cut, as further easing could put downward pressure on the yuan-dollar exchange rate.

“Given the current challenges, the central bank is unlikely to announce further interest rate cuts while the People’s Bank of China helps support (the yuan),” said Robert Carnell, head of Asia-Pacific research at ING. hudson lockett

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