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Octa’s Market Snapshot: The Fed Is Stuck Between Recession and High Inflation

Ang Kar Yong
·2-min read

On 30 April – 1 May, the Federal Open Market Committee (FOMC) of the U.S. Federal Reserve will meet to decide on key interest rates in the U.S. economy. The Fed is expected to leave rates unchanged.

Since the beginning of this year, the U.S. Federal Reserve has been broadcasting that key interest rates have peaked and are trending downwards. However, the tone of the accompanying rhetoric has changed in favour of tighter monetary policy. The reason for this is inflation, which has no plans to decline. Besides, we also see a slowdown in the U.S. economic growth.

On 25 April, the U.S. Bureau of Economic Analysis (BEA) reported on GDP dynamics (Advance Estimate)—GDP growth slowed to a 1.6% rate in the first quarter, well below expectations. The next day, the BEA released the PCE index—a measure of inflation closely monitored by the Federal Reserve. It showed that the prices rose by 0.3% from February to March, the same as in the previous month. The index rose faster than the Fed’s 2% inflation target in the third straight month. Thus, the annualised price growth rate was 2.7% in March compared to 2.5% in February.

‘Weak U.S. economic growth and accelerating inflation are pushing back the likelihood of a key rate cut in 2024,’ said Kar Yong Ang, Octa Broker financial market analyst. ‘In fact, the FOMC does not have any positive factors at the moment’, he added.

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The released GDP and Fed’s preferred inflation data sets a hawkish tone for the upcoming meeting, which means the USD will likely continue strengthening against all major currencies. USDJPY may rise above 160.00 by the end of this week.

About Octa

Octa is an international broker that has been providing online trading services worldwide since 2011. It offers commission-free access to financial markets and various services already utilised by clients from 180 countries with more than 42 million trading accounts. Free educational webinars, articles, and analytical tools they provide help clients reach their investment goals.

The company is involved in a comprehensive network of charitable and humanitarian initiatives, including the improvement of educational infrastructure and short-notice relief projects supporting local communities.

Octa has also won over 70 awards since its foundation, including the ‘Best Educational Broker 2023’ award from Global Forex Awards and the ‘Best Global Broker Asia 2022’ award from International Business Magazine.

This article was originally posted on FX Empire

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