Key Insights to Watch in Wednesday’s Federal Reserve Meeting
The first Federal Reserve meeting of 2025 will conclude on Wednesday, with the rate decision announced at 19:00 UTC and a press conference by Chairman Jerome Powell at 19:30 UTC. Key points include:
- The current target interest rate is 4.25% to 4.5%, down 100 basis points since September.
- A 25 basis point cut occurred in December, but forecasts indicate slower future cuts, impacting risk assets like BTC.
- The upcoming meeting is expected to maintain rates, with continued hawkish guidance from December.
- Danske Bank suggests the meeting won't significantly impact markets as rate decisions have been communicated in advance.
Key issues that may influence market reactions during Powell's press conference:
Deportation of illegal immigrants
- Estimates suggest deportations could reach between one million and ten million.
- This could tighten the labor market and increase inflationary pressures, potentially affecting rate cut expectations.
- Analysts highlight a significant impact on the labor supply and overall inflation if deportations occur.
U.S. debt ceiling
- The U.S. has reached a debt ceiling of $36 trillion, prompting extraordinary measures from the Treasury.
- These measures may increase liquidity in the economy, countering the Fed's quantitative tightening efforts.
- Powell may face questions about these measures and their potential effects on risk assets.
Rent inflation
- Leading indicators show shelter inflation moderation, influencing consumer price index trends.
- The "all tenant rent" index increased by 3.2% over the last four quarters, lower than previous rates.
- Acknowledgment of this disinflationary trend by Powell could boost risk asset values.