The American Central Bank (Fed) began its two-day meeting on Tuesday during which it should decide to maintain its rates in their current range, even if its president, Jerome Powell, considers inflation still “too high”.
The meeting of the Monetary Policy Committee (FOMC) began at 10:00 a.m. (2:00 p.m. GMT) as planned, a Fed spokesperson told AFP. It will end at midday on Wednesday with Mr. Powell’s traditional press conference.
The decision will be announced on Wednesday at 2:00 p.m. (6:00 p.m. GMT) in a press release. However, it should give rise to few surprises, as almost all market players predict that the Fed will extend its pause in rate increases, the third pause in four meetings.
Overnight rates are currently located in a range between 5.25% and 5.50% since the meeting at the end of July, after eleven increases since March 2022. This very rapid rate of credit increase is justified by the desire to prevent inflation from becoming anchored in market and consumer expectations.
Inflation has slowed sharply since its peak, reaching 9.5% in July 2022 and stood at 3.4% year-on-year in September, stable for three months, according to the PCE index, which is favored by the Fed.
There is still a way to go to bring it back to the long-term target of 2.0% aimed by the Fed, and Jerome Powell judged in mid-October that it still remained too high. A few months of good numbers are just the start of what it will take to be sure inflation is falling sustainably, he said.
But, he warned, the path risks being strewn with pitfalls and taking time.
The mantra repeated by the majority of Fed members is now higher, for longer, but some analysts fear that rates kept high for too long could end up having a serious impact on the American economy, which has shown itself until here particularly resilient.
GDP growth more than doubled in the third quarter, to 4.9% at an annualized rate, and the unemployment rate remains stubbornly low, at 3.8%.
But the yields on 10-year Treasury bills, which serve as a benchmark, soared in September and October, to flirt with 5%, and remain very high, 4.81%.
However, this increase in yields represents a risk for the financial markets and increases the cost of credit, particularly property loans.
30-year loans, the most widespread in the United States, reached 7.79% on October 26, according to data from the real estate refinancing group Freddie Mae, the highest since September 2000.