The US Federal Reserve is expected to raise interest rates at its meeting on Wednesday, despite weaker than expected inflation rates.
The Federal Open Market Committee is expected to raise the fed funds target rate by a quarter of a point, from 1 to 1.25 percent.
The move is to come despite inflation still coming in under the Fed’s preferred rate, with the PCE deflator falling to 1.5 percent from 1.8 percent earlier in 2017. The Fed began their policy tightening programme in December 2015, after more than a decade of flat rates, but investors are growing increasingly doubtful policymakers will be able to stick to their anticipated pace of tightening of three interest rate rises this year and next as the economy begins to flag.
“I don’t think inflation coming off is going to alter the current upward trajectory for rates right now,” said Chris Rupkey, chief financial economist at MUFG Union Bank.
“I don’t think we’re going to take one or two rate hikes off the table for the next one or two years. I think they’re going to stick with the game plan.”
Gold prices fell for the fifth day straight on Tuesday as investors anticipate the hike, marking its longest string of losses since the nine-session period ended March 10 according to FactSet data.
