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Investing.com -- The Federal Open Market Committee (FOMC) meeting today will not result in any changes to interest rates, predicted by Blerina Uruci, Chief US Economist at T. Rowe Price. In fact, Uruci sees the meeting as a "non-event" as the Federal Reserve (Fed) will not provide new guidance on the outlook for monetary policy.
"I expect no change to interest rates at the January meeting and no new guidance on the outlook for monetary policy," Uruci said.
The labor market has shown strength since the previous meeting in December, with the labor market prompting the Fed to begin cutting interest rates in September of last year. Further, the December Consumer Price Index (CPI) report indicated subdued inflation pressures, reducing concerns about a potential rate hike in 2025.
The economic situation is described as a ’goldilocks’ scenario, with a robust labor market that is not driving inflation up. However, this balance may be precarious due to potential tariffs, which pose an upside risk to inflation and a downside risk to growth. Additionally, the fiscal policy agenda is expected to be favorable for growth, while immigration policy could result in further tightening of the labor market.
Uruci also predicted that Fed Chairman Jerome Powell would aim for today’s meeting and press conference to be uneventful. The market pricing of the interest rate path in 2025 aligns with the December dot plot, and any rate movements this year have been attributed to policy uncertainty under the new Republican administration.
While there is limited new information or clarity on these policies, Uruci does not believe that the lack of detail means they will not be a priority for the new administration. Powell is expected to emphasize the higher than usual uncertainty and the FOMC’s attentiveness to new developments and data signals.
Uruci maintains a forecast that the Fed will cut interest rates by 50 basis points this year, a prediction now aligned with the market. Given the cautious approach expected from the Fed in 2025, market pricing of Fed cuts is likely to be skewed towards the second half of the year.
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