The Federal Reserve aims to slow down the rise in interest rates, but will not give up its fight against inflation

Patti Domm -

Everything indicates that the Federal Reserve (Fed) will raise interest rates only a quarter of a point this Wednesday.

He is also likely to signal that he will remain vigilant in his fight against inflation even as he reduces the size of the increases.

The Fed will release its latest interest rate decision this Wednesday at 2 pm ET, with Fed Chairman Jerome Powell holding a press conference half an hour later.

The forecast quarter-point hike follows December's half-point increase, and would be the smallest increase in the range of the federal funds target rate since the first hike of the cycle last March.

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Although the meeting is expected to be relatively quiet, analysts say it could be a challenge for the head of the Federal Reserve to temper the reaction of financial markets.

Markets have been rising as investors hope the central bank will provide a soft landing for the economy while dampening inflation enough to return to easy policy.

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“How are you going to tell people to calm down, calm down and not get so excited that we are nearing the end of interest rate hikes?” asked Peter Boockvar, chief investment officer at Bleakley Financial Group. .

“He's going to do it by saying that the Federal Reserve is going to keep up the pressure for a while.

That it has done so does not mean that it is a quick bridge to relaxation, ”he added.

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Wednesday's rate hike will be the eighth since last March.

The target interest rate for federal funds would be between 4.50% and 4.75%.

This figure is only half a percentage point away from the final point estimated by the Federal Reserve, that is, from 5% to 5.25%.

“I think it will tighten financial conditions again.

I think the markets expect it.

People realize how much credit spreads have moved, how much the equity market has moved, how much technology stocks have moved.

This month has been extraordinary,” said Rick Rieder, BlackRock's chief investment officer of global fixed income.