Loading the Agenda…
Loading the Agenda…
MajorAgendaWed, Oct 28 ET 2:00 PM1 min read
The Fed's policy rate influences the cost of short-term money between banks and, through lenders and financial markets, what households and businesses pay to borrow. The forecast is 4.0%, unchanged from the previous 4.0%. Recent inflation reports have put an increase back in play, however, and officials have not ruled it out, making this a test of how the Fed balances price pressure against the economy's ability to withstand expensive credit.[1]
Expected 4.0% Last release 4.0%
If it comes in above expectations If the rate is above the expected 4.0%, the Fed has chosen further tightening, putting more cost pressure on short-term floating-rate borrowing and new financing and giving households and businesses more reason to postpone financed purchases or investment.[1]
If it comes in below expectations If the rate is below the expected 4.0%, the Fed has begun easing, creating room for lower short-term borrowing costs. The important distinction is whether inflation risks have eased or the Fed has become more concerned about economic weakness.[1]
For stocks, tighter policy can reduce what investors will pay for distant profits and squeeze property companies and other businesses dependent on borrowing. Easing can offer the opposite support, but banks and consumer companies could still face weaker earnings if it reflects a slowing economy. Even with a 4.0% hold, watch the press conference's explanation of the next move, then Treasury yields and actual loan pricing: an unchanged policy rate does not establish cheaper financing.[1]