What can we expect from the FED'S first meeting of 2023

28/01/2023

I already published yesterday, so today is not a "proper news", but just a quick reminder to connect on your FT app on February 1st to see what the Fed announces for the short-term interest rates. ​ The consensus is that the Fed will rise the rates by 25 basis points, less than previously expected, due to the slow down of inflation over the past months. I think that markets have priced in such policy, so such an announce should not have a major impact. ​ However, several economists, including Mohammed El Arian, advocate for the previously planned 50 basis point increase. Reasons are: - inflation seems to shift from goods to services - a sector where it is more difficult to fight inflation ​ - in the medium run China might reopen imports leading to inflationary pressure ​ - the US labour market is particularly tense, which might lead to inflationary pressure, for example Walmart has already announced that it will raise salaries from 12$ to 14$ per hour. Hence, rising rates by 50 basis points would be to play safe and ensure not to fight the same fight twice.