Here's everything to expect from the Fed's policy meeting

The Fed is stuck with high inflation and recent comments from Fed officials suggest there is nothing they can do at this time.
Markets are generally clear that the US Federal Reserve's Federal Open Market Committee (FOMC) will not announce any interest rate policy changes this meeting, instead keeping the original interest rate for several months, or even longer.
The Fed will almost certainly keep the overnight reference interest rate unchanged at 5.25% -5.5% at the end of its policy meeting on Wednesday (early May 2, Vietnam time) due to stuck in a state of persistently high inflation.
A growing number of Fed officials are finding it difficult to return to the ultra-low interest rates that prevailed before the Covid-19 pandemic, due to everything from the federal budget deficit to the need to invest in green energy , human intelligence, domestic production…. increasingly high. Recent comments from policymakers and Wall Street analysts alike suggest there is nothing else the FOMC can do at this point.

“Almost every FOMC member is talking about the same scenario, with just one or two exceptions,” said Guy LeBas, chief strategist at Janney Montgomery Scott. “Fed policymakers largely agree that inflation data over the past few months has been too hot to justify action in the near term. But they still hope to be able to cut interest rates later.”

According to market observers, the only information about change that can be received from this meeting is the announcement that the Fed will soon reduce its bond holdings on its balance sheet before ending the process. called "quantitative tightening - QT". Barring that, the Fed will announce that it is not ready to change policy at this time.

Fed officials, from Chairman Jerome Powell to the Fed's regional bankers, have expressed reluctance to start cutting interest rates until they are more confident that inflation is on track. and will return to the 2% target. Two weeks ago, Mr. Powell surprised markets with a fiery speech about the extent of his and his colleagues' commitment to achieving that goal.

At a spring conference of the International Monetary Fund and World Bank, Mr. Powell said: “We said at the FOMC that we need to have greater confidence that inflation is progressing sustainably at 2% before policy relaxation.” “Recent data clearly does not give us more confidence, but instead suggests that it may take longer than expected to gain that confidence.”
Recent US economic data further supports the views of Mr. Powell and his colleagues. The personal consumption expenditure price index published last week showed that overall inflation in March 2024 was at 2.7% over the same period last year, of which core inflation (excluding food and energy ) increased by 2.8%. Fed officials view inflation as an important basis for policy decisions, with them focusing more on core inflation as a better indicator of long-term price trends.
Further evidence that Mr. Powell's comments are reasonable when the US Department of Labor on Tuesday announced that the employment cost index (considered a comprehensive measure of labor costs) of the US in the quarter I/2024 grew 1.2%, 0.3 percentage points higher than the previous quarter and also higher than the 1% expected by Wall Street analysts.
None of the above data is consistent with the Fed's goals and may cause Mr. Powell to be even more cautious when speaking about policy views from now on.
The market has actually grown quite well since Mr. Powell made comments at the Spring Conference of central bank leaders, on April 16, 2024. The Dow Jones Industrial Average even rose during that period as investors seemed willing to accept the prospect of interest rates remaining high for longer than previously expected. The USD also strengthened, the Dollar index on May 1 reached 106.49, the highest since November 2023.

Reduce interest rates once in 2024
According to CME's FedWatch tool, it is expected that there is about a 50% chance that the Fed will cut interest rates for the first time in September 2024, and by the end of 2024 will only reduce a total of 1/4 percentage point. However, some Wall Street analysts remain hopeful that inflation data will show good progress and allow the US central bank to cut interest rates more than once this year.
“While the recent surprise increase in inflation has narrowed the path for the FOMC to cut interest rates this year, we expect upcoming inflation reports to be positive,” said Goldman Sachs economist David Mericle. softer and still expect interest rates to be cut for the first time in July 2024 and again in November 2024.
In general, economists on Wall Street are preparing for the possibility that the Fed could delay lowering interest rates even longer, especially if inflation continues to rise unexpectedly. In addition, they also expect the possibility that the US Government will increase taxes after the presidential election - a measure favored by former President Donald Trump, the Republican candidate - and that could further heat up inflation. further.
“While the recent surprise increase in inflation has narrowed the path for the FOMC to cut interest rates this year, we expect upcoming inflation reports to be positive,” said Goldman Sachs Economist David Mericle. softer and still expect interest rates to be cut for the first time in July 2024 and again in November 2024.
In general, economists on Wall Street are preparing for the possibility that the Fed could delay lowering interest rates even longer, especially if inflation continues to rise unexpectedly. In addition, they also expect the possibility that the US Government will increase taxes after the presidential election - a measure favored by former President Donald Trump, the Republican candidate - and that could further heat up inflation. further. further.

Minutes from the March meeting showed that the Fed may have a tapering focus on Treasuries, as mortgage bonds expired below the $35 billion monthly target. JP Morgan economists have noted that the next step is likely to be to halve the Treasury's monthly flow limit from $60 billion to $30 billion.