Fed Unlikely to Cut Rates This Week Says Former Vice Chairman

Former Fed Vice Chairman Roger Ferguson, appearing on a prominent financial news program, expressed his views on the upcoming Federal Reserve interest rate decision. He stated that the central bank is unlikely to cut interest rates at this week's meeting, citing the current economic conditions and the Fed's cautious approach. Ferguson emphasized that the Fed is operating in a "wait-and-see" mode, hoping for further declines in inflation while remaining patient.

Ferguson's comments highlighted the Fed's cautious stance, noting that the central bank will continue to send "vigilant and patient" messages to the market. He suggested that the market may be disappointed by this approach, as some segments are hoping for a rate cut. Ferguson also mentioned that a "good rate cut," which would occur only when inflation falls without economic slowdown or labor market disruption, is unlikely this year. He indicated that while the Fed came close to a soft landing, there are still many risks, and a clearer picture may emerge next year if inflation continues to decline.

The discussion also touched on geopolitical risks in the Gulf and the potential impact on oil prices. Ferguson argued that while recent increases in oil prices have not yet affected core inflation, this could change, and the Fed should be vigilant. When prompted about President Trump's suggestion to cut interest rates now and raise them later if necessary, Ferguson was cautious, noting the risks of short-lived inflation and the potential for deteriorating inflation expectations. He emphasized that the Fed does not want to repeat past mistakes by being late to address inflation.

On Wednesday, the Federal Open Market Committee is expected to maintain its benchmark overnight interest rate at 4.25%. This decision comes amidst economic uncertainty and political pressure, with markets widely anticipating this outcome. The updated projections from the Federal Reserve, to be released alongside the rate decision, will provide critical insights into the future trajectory of the labor market, inflation, and interest rates. These forecasts will be closely scrutinized by financial markets for their implications on the Fed's outlook for the economy over the coming years.

The decision to hold rates steady reflects the Fed's cautious approach in the face of ongoing economic uncertainties. The central bank has been monitoring the impact of recent policies, which have the potential to slow growth and increase inflation. By maintaining stability in the financial markets, the Fed aims to assess the broader economic implications of these policies. The Fed's decision will be closely watched by investors and economists, setting the tone for future monetary policy actions and economic outlook.