The past 60 days have been tumultuous for the global economy. 5 banks have collapsed, inflation rates have soared, and the future of the dollar, the world's reserve currency, is increasingly uncertain. Governments around the world are scrambling to come up with plans to stabilize their economies.
Still, many experts believe we may be on the brink of a significant shift toward a new financial era - the Cryptocurrency Era or CBDC.
The Federal Reserve is set to raise interest rates on Wednesday, May 3rd, to slow inflation and combat risks, including bank failures and the possibility of a US debt default.
The expected quarter-percentage-point rate hike will end a 14-month tightening cycle, although concerns about inflation and the economy's weakening state persist.
Investors are anticipating the policy statement, which will be released at 2 pm EDT, and Fed Chair Jerome Powell's press conference. The statement and Powell's elaboration will address the risks that have grown increasingly more conflicting, such as slow inflation, the weakening economy, and a trio of recent bank failures.
Fed's benchmark overnight interest rate to the 5.00%-5.25% range.
As of March 18, Fed policymakers indicated they were likely to halt rate hikes after one more increase, expected at this week's meeting, which would lift the Fed's benchmark overnight interest rate to the 5.00%-5.25% range. Given this consensus and other pressing concerns, the Fed may at least suggest that this hike will be the last of the current tightening cycle, absent a future inflation surprise.
The Fed will have to assess the collapse of First Republic Bank and determine if the financial sector faces broader turmoil or whether credit will become less accessible and more expensive. The tradeoff for moving forward with a rate increase this time may be that Powell will have to adopt a less forward-leaning tone regarding prospects for additional tightening at the following meeting.
Hints about the Fed's direction will come first from the rate-setting Federal Open Market Committee's new policy statement. With rate increases hardwired into the Fed's statement since January 2022, the FOMC will likely soften its forward guidance on additional rate hikes, particularly now that the policy rate after this meeting will hit the peak most Fed officials had projected.
The rate hike and the Fed's statement will significantly affect the average American.
The higher interest rates will mean that borrowing money will become more expensive, including loans for mortgages, cars, and credit cards.
However, savers may earn more interest on their savings accounts. Moreover, shifting towards more neutral guidance could signal a pause in rate hikes, potentially resulting in a more stable economic environment for consumers and businesses.
What are you thinking is going to happen? Keep an eye on today`s outcome.