Fed starts first interest rate review for year
The US Federal Reserve began a two-day meeting on Tuesday at which policymakers look set to hold interest rates steady to fight against inflation and continue talks about when to start cutting them. The central bank's decision will be announced on Wednesday, after which Fed Chair Jerome Powell will take questions from reporters. The Fed has rapidly hiked interest rates in a bid to tame surging inflation and bring it back down towards its long-run target of two percent -- with surprising success. Its target inflation rate, which strips out volatile food and energy prices, recently fell below 3.0 percent on an annual basis, while economic growth and the labour market have remained robust. But the Fed's work is not finished, so policymakers are widely expected to vote to keep the US central bank's key lending rate at a 23-year high of between 5.25 and 5.50 percentage points. Traders and analysts are split mainly between those who believe the economic conditions are such that the first rate cut can come in March, and those who expect the Fed to tread more cautiously, and move in May instead. Futures traders have dialed back their optimism over a March cut in recent weeks, and now assign a less-than-50 percent chance that the Fed will move then, according to CME Group data. But they are much more confident about the chances of a May cut, assigning a probability of almost 90 percent that the Fed will announce a reduction of at least 25 basis points at its May 1 meeting. (AFP)