FXstreet.com (Barcelona) - The US Federal reserve will announce tomorrow its monetary policy decision, which, by most accounts will be to keep its key interest rate unchanged at 2.0%, while the experts advise to pay attention to the Fed's language for hints of future rate hikes in the second half of the current year.
US economy is showing a persistent weakness despite consecutive rate cuts since August which has lowered the main interest rate from 5.25, while the credit crisis has not faded yet. Furthermore fast growing paces of energy and food prices do add reasons for concern to the monetary policy committee.
Market analysts point out to the Fed's statement as the highlight of the monetary policy decision to assess the Fed's general lines for the future monetary policy, the general consensus advances a somewhat neutral stance, although voices are for a rate hike in September 2009.
Consumption in the United States seems to have resisted the economic slowdown, and the risks of significant recession have eased in the latest weeks, therefore, the reasoning in favour of aggressive rate hikes to avoid falling into recession, will consequently, swift in favour of rate hikes, once the risk has not materialised. In this case, we could expect a rate hike in September.
Nevertheless, unemployment seems to be increasing at a steady pace, which could be a reason against rate hikes, on the other hand, consumer prices are growing at a 3.6% year on year pace, while GDP is growing at 2.1% pace, oil is the main responsible of such high CPI, as core prices are growing at moderate levels, in this line some voices point out at the possibility of raye hikes, once the oil prices start to show sensitive drops.