Fed expected to hold rates this week as political storm grows around Powell

The US Federal Reserve is widely expected to halt its interest rate cutting cycle this week, as a steadier jobs market restores a degree of consensus at the central bank after months of growing division.

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Several officials, including some close to chairman Jerome Powell, have been signalling that rates are now in the right place - after three consecutive cuts - to shore up employment and still keep downward pressure on inflation.

“They are now essentially within the strike zone of neutral estimates,” said Mr Josh Hirt, senior US economist at the Vanguard Group, referring to the level where rates will neither restrain nor stimulate the economy.

“That brings about more caution, less urgency” for more cuts, he said.

The meeting offers Mr Powell a chance to direct attention away from the political and legal dramas engulfing the Fed and back to the central bank’s core job of controlling inflation and maximising employment.

Any respite may prove short-lived. The expected decision to hold rates is likely to amplify the outrage of President Donald Trump, who wants them slashed.

The statement from the Federal Open Market Committee (FOMC) is due on Jan 28 at 2pm in Washington (3am on Jan 29, Singapore time), and Mr Powell will address reporters at 2.30pm.

His remarks will be scrutinised for hints about how long the Fed might stay on hold, what could tilt the balance back towards cuts and whether the chairman has any new moves up his sleeve in the fight with Mr Trump.

On the economic front, fresh data has helped ease the tensions that tore the FOMC apart over recent months.