The Fed is likely to keep interest rates unchanged this week... The timing of additional cuts may be pushed further back.

Source: BlockMedia Original Title: The Fed Likely to Hold Interest Rates Steady This Week… “Further Cuts May Be Delayed” - MarketWatch Original Link: https://www.blockmedia.co.kr/archives/1035892 As the Federal Reserve(Fed) is widely expected to keep interest rates unchanged this week, market attention is shifting to how much later the next rate cut will occur. In a situation where inflation slowdown is not meeting expectations, there is growing confidence that the Fed will maintain a wait-and-see stance for the time being.

According to major foreign media, the Fed is likely to keep the benchmark interest rate at the current level of 3.5~3.75% during the Federal Open Market Committee(FOMC) meeting on the 27th and 28th. Based on CME FedWatch, the probability of rates remaining unchanged at this meeting is overwhelmingly high. The market is essentially accepting a hold as a certainty.

Since September last year, the Fed has cut rates three times in a row, lowering a total of 75bp. At that time, the main reasons were economic slowdown and weakening labor markets. However, subsequent economic indicators have shown a more resilient trend than expected, and the urgency for additional easing has diminished.

As a result, the timing of further rate cuts is gradually being pushed back. Financial markets are now viewing the next possible rate cut as occurring after July at the earliest, and as the waiting period lengthens, there is speculation that additional cuts may not happen within this year. One senior economist said, “The longer rate hikes are delayed, the higher the economic criteria will need to be to justify further easing.”

Wall Street’s outlook is also divided. One senior economist predicts that the Fed will hold rates steady throughout this year, with the next policy change possibly coming in the second half of 2027. Meanwhile, some economists believe that if inflation slowdown is confirmed in the second half, there remains room for additional cuts.

The Fed’s cautious stance is also linked to mixed economic conditions. While inflation still exceeds the Fed’s 2% target, the labor market has recently stabilized somewhat after weakening last year. The unemployment rate in December last year fell to 4.4%, and recent economic indicators generally show a better-than-expected trend.

Political variables also add to the Fed’s burdens. Uncertainty around tariffs is adding to inflation and economic outlook risks, and there are ongoing concerns that hasty rate cuts could lead to a resurgence of inflation. One senior economist commented, “The Fed faces a very difficult balancing act between inflation pressures and economic slowdown risks.”

Former Fed officials are also cautious about further rate cuts. A former Federal Reserve Chair stated, “The Fed will not move again until it sees clear signals that inflation is on a definite downward path.” The possibility of a temporary rebound in prices due to first-quarter adjustments this year also complicates policy decisions.

Market watchers are also paying attention to potential shifts in monetary policy following the change in Fed leadership. However, some analysts suggest that aggressive rate cuts in the future could actually push long-term interest rates higher. Therefore, in the short term, economic indicators and inflation trends are expected to be the key variables influencing the Fed’s actions.