Will the Fed and BOE stay put on interest rates this week?
The US Federal Reserve is expected to maintain its key interest rates at current levels this week with the Funds Rate target range forecast to remain between 5.25% and 5.5% for a fourth consecutive meeting.
Fed funds futures currently price in a 97.4% chance of no change. Then on Thursday, the Bank of England (BoE) is also set to stay put on rates. Governor Andrew Bailey and other top BOE members have been saying until recently that a rate cut would be premature. They also warned about the risks from strong wage growth, as IGTV’s Angela Barnes explains.
(AI Video Summary)
The Federal Reserve
The Federal Reserve, which is basically the central bank of the United States, is most likely going to keep its key interest rates the same for the fourth time in a row. This means they won't be changing how much it costs to borrow money. However, there is a good chance (around 59.7%) that when they meet in March, they might actually lower the rates by a little bit, like 0.25%. The goal of all this is to make sure the US economy grows in a nice and steady way, not too fast or too slow. They expect the economy to grow by about 1.4% in 2024 and they want the unemployment rate to be around 4.1%.
At the same time, the Federal Reserve plans to shrink its balance sheet, which is basically the total amount of money and assets they have, by selling some of the things they own. Right now, they're selling up to $95 billion worth of stuff every month, but they still have a long way to go to get back to where they were before the pandemic, which was around $4.15 trillion in February 2020.
The Bank of England
Now, let's talk about the Bank of England (BOE), which is the central bank of the United Kingdom. They're also probably going to keep their interest rates the same for now. The top people at the bank, like Governor Andrew Bailey, have said it's too early to lower the rates. They're worried that if they do, it might lead to some problems because the wages people are getting paid are going up too quickly. However, the recent data on things like how prices are going up, how much people are getting paid, and how the economy is doing, has been not as good as they expected. So they might change their minds and decide to lower the rates after all.
In short, the Federal Reserve is going to keep interest rates the same and wants the US economy to keep growing in a nice way. The Bank of England is also not planning to change interest rates, but if the economy keeps underperforming, they might change their minds.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Start trading forex today
Find opportunity on the world’s most-traded – and most-volatile – financial market.
- Trade spreads from just 0.6 points on EUR/USD
- Analyse with clear, fast charts
- Speculate wherever you are with our intuitive mobile apps
See an FX opportunity?
Try a risk-free trade in your demo account, and see whether you’re onto something.
- Log in to your demo
- Take your position
- See whether your hunch pays off
See an FX opportunity?
Don’t miss your chance – upgrade to a live account to take advantage.
- Get spreads from just 0.6 points on popular pairs
- Analyse and deal seamlessly on fast, intuitive charts
- See and react to breaking news in-platform
See an FX opportunity?
Don’t miss your chance. Log in to take your position.
Live prices on most popular markets
- Equities
- Indices
- Forex
- Commodities
Prices above are subject to our website terms and agreements. Prices are indicative only. All share prices are delayed by at least 15 minutes.
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
