US Federal Reserve: What to expect from FOMC meeting today?

The Federal Open Market Committee (FOMC) is meeting over two days October 31 and November 1 to decide on the Federal Funds Rate. The Fed Chairman Powell will be announcing the rate decision today on November 1 at 2 PM. ET. The live show may be watched on the Federal Reserve YouTube channel. The US Federal Reserve is expected to keep the interest rates unchanged today.

Currently, the interest rates are in a range of 5.25% to 5.5%, a 22-year high. The last rate hike came in July.

Nigel Green, CEO and founder of deVere Group, one of the world’s largest independent financial advisory, asset management and fintech organisations say that he expects the Federal Reserve to leave US interest rates unchanged today. “Investors will be watching this carefully, but the central bank of the world’s largest economy is almost certainly going to hold rates steady on Wednesday, which will be bullish for stock markets.”

A pause in November may not be considered a full stop in the rate hike spree that started back in 2022. Fed Chair Jerome Powell has stated in public statements that the US central bank will probably keep interest rates unchanged at its November meeting, but he has left the door open for a future hike if decision-makers observe further evidence of steady economic growth.

October saw a five-month peak in US near-term inflation forecasts as people’s pessimistic views about the economy were reinforced by their concern about higher gas costs. Consumer spending increased and the Fed’s preferred gauge of underlying inflation advanced to a four-month high in September, paving the way for another interest rate hike in the coming months.

The 10-year Treasury yield had surged in October, hitting the highest level in 16 years and even briefly breaking the 5% mark.

Indeed, the Fed wants to see higher interest rates in order to control inflation within its target. US Fed has already gone for 11 rate rises totaling a whopping 525 basis points, making this the quickest rate hike sequence in forty years to bring down the highest level of inflation since the 1980s since March 2022.

Meanwhile, stock market gains faltered, and the S&P 500 continued to decline from its peak in July, falling 10% into the “correction.” territory. Gold reached $2,000 and oil reached $85 in light of recent geopolitical events. In October, Dow fell almost 1.5%, S&P 500 declined by 2.5% while the tech-heavy Nasdaq 100 slid harder by nearly 3.25%.

It remains to be seen how the geopolitical environment shifts and what the central bank learns from the latest economic data. The market will be focused on how long the Fed sticks to its higher-for-longer stance before America enters the 2024 election year, which is precisely 12 months from now.