Fed Expected to Pause Rate Hikes, Warsh Faces Policy Communication Test

Odaily reports: The Federal Reserve is expected to keep interest rates unchanged at its policy meeting concluding this Thursday, even though the latest inflation data and economic performance still support further rate hikes. How Fed Chair Kevin Warsh explains the rationale for the pause, and whether he hints at resuming rate hikes in December, will be the market's focus.

The Fed unanimously decided in September to raise rates by 25 basis points, lifting the federal funds rate target range to 3.75%–4.00%. Economic data released since then has not shown a clear easing of inflation pressures, but multiple officials have signaled that back-to-back rate hikes are unnecessary, fueling market expectations of a pause in October and another move in December.

The market widely expects rates to remain unchanged at this meeting. According to prior CME data, as of early this week, interest rate futures traders had lowered the probability of another 25 basis point hike in October to below 10%, while about three-quarters of traders expected at least one more rate hike before year-end.