With the Federal Reserve widely expected to raise interest rates on Wednesday, financial markets are focused on whether signs of an acceleration in U.S. economic growth will prompt the central bank to ramp up the pace of monetary policy tightening.
This week’s two-day policy meeting could mark the formal end of the “accommodative” level of rates the Fed has used to support the American economy since the onset of the 2007-2009 recession.
The Fed’s current policy statement has included that description of loose policy as a staple element in recent years, though officials recently have described it as out of date and likely to be removed, either this week or in the near future.
The probability the Fed will raise its benchmark overnight lending rate by a quarter of a percentage point on Wednesday, in what would be its third hike this year, is nearly 95 percent, based on an analysis of fed fund futures contracts by CME Group.
The larger question is whether the Fed reshapes its monetary policy outlook for the next few years to factor in stronger GDP growth or whether concerns about a possible global trade war or economic slowdown cause it to stick close to its current view.