The US Fed’s rate hike may not be too big this time

The US Fed’s rate hike may not be too big this time

After its first policy meeting of the year, the US Federal Reserve will announce its decision on its benchmark interest rate tonight. Investors are expecting a quarter point adjustment to the pace of hikes or an end to hikes altogether.

An increase of 0.25 percentage points will take rates between 4.5% and 4.75% and mark a slowdown from the hikes delivered last year.

In a bid to tame inflation, the Fed Reserve raised in December 2022 the rate by half a percentage point. Following the Fed’s decision, the UAE Central Bank raised interest rates by 50 basis points to 4.4%, from 3.9%.

The last adjustment was lower than the four consecutive 75 basis point increases during the year, said to be the most aggressive policy in decades.

Some analysts said the hike imposed last December was a sign that the Fed is going to take a more “hawkish” policy stance on interest rates and that the upcoming rate adjustment would be the last.

According to David Mericle, Chief US Economist at Goldman Sachs, the Fed is expected to deliver three 25-basis-point rate hikes in February, March and May and then hold the funds rate at 5-5.25% for the rest of 2023.

He said the Fed is