While the hike of interest rates is on expected grounds, its expected hint on the impact of Trump’s tax overhaul is eagerly awaited by investors.
With the widely expected raise of interest rates by the Federal Reserve is likely to occur on Wednesday, it is also likely to provide its strongest hint on the impact of the Trump administration’s tax overhaul on the U.S. economy.
Investors are likely to pay close attention on how the central bank aims to balance a stimulus-fueled economic boost with the ongoing weak inflation and tepid wage growth that has acted some some policymakers’ appetite for higher interest rates.
Following the end of the two-day meet, the Fed’s policy statement as well as its latest economic projections are scheduled to be released at 2 p.m. EST (1900 GMT).
Fed Chair Janet Yellen, whose term ends early next year, is likely to hold a press conference 30 minutes later.
Fed Governor Jerome Powell, her successor, had said at his recent confirmation hearing before a Senate panel that he had “no sense of an overheating economy”, thus hinting that he has no plans to quicken the pace of interest rates until there is evidence of an acceleration in inflation and wage growth.
In 2017, the central bank has increased interest rates twice and is expected to introduce three more hikes in 2018.
As Fed Chief, Yellen has largely pursued a loose monetary policy in the hope that unemployment will continue to decline; the move has produced results – workers have rejoined the labor force and wages have risen.
Powell, who has worked closely with Yellen, opined the process still has room to run.
Donald Trump’s proposed tax overhaul, which includes a significant slashing of income tax for corporates, is likely to fuel more economic growth if it passes the Republican-controlled Congress, as it appears likely.