The First FOMC Meeting of the New Year Likely to Feature a Baby Step... Will Rate Hikes End?

FOMC Meeting Results Announced at 4 AM KST on the 2nd

[Asia Economy Reporter Son Sunhee] On the 31st (local time), the U.S. Federal Reserve (Fed) will hold its first Federal Open Market Committee (FOMC) meeting of the year and decide on the benchmark interest rate. The market consensus is that the Fed will take a 'baby step' by raising the benchmark interest rate by 0.25 percentage points.

The results of this FOMC regular meeting, held from January 31 to February 1, are scheduled to be announced at 2 p.m. Eastern Time on the 1st (4 a.m. Korean time on the 2nd).

Jerome Powell, Chairman of the U.S. Federal Reserve (Fed). Photo by Yonhap News

According to major foreign media, a 0.25 percentage point increase in the benchmark interest rate is highly likely at the February FOMC. In this case, the current U.S. benchmark interest rate of 4.25?4.50% will rise to 4.50?4.75%. After an unprecedented four consecutive giant steps (raising the benchmark interest rate by 0.75 percentage points at once) last year, the Fed is gradually reducing its pace following a big step (0.50 percentage point increase) at the end of the year.

The focus now is less on the size of the increase and more on the 'timing of the end of rate hikes.' The market expects the FOMC meeting scheduled for March to be the last rate hike. This expectation is based on the recent clear moderation in the rise of U.S. inflation and the International Monetary Fund (IMF) statement on the 30th that "global inflation has peaked this year." In this case, the final U.S. benchmark interest rate is expected to reach 4.75?5.00%.

However, some caution that uncertainties remain, such as the prolonged Russia-Ukraine conflict, cost pressures from China's economic reopening (reopening), and the resurgence of international oil prices, so vigilance should not be relaxed.