Despite a sputtering US economy, the Federal Reserve is likely to hold fire on interest rates as it waits for either an easing of inflation or a pickup in growth, analysts say.
No change in rates is expected at Wednesday's meeting of the US central bank's Federal Open Market Committee (FOMC), which has held its base rate steady at 5.25 percent since last June.
Yet some analysts are still holding out hope that the Fed will open the door to a rate cut sometime this year if conditions continue to soften.
Some recent data has been surprisingly sluggish -- GDP for the first quarter was a tepid 1.3 percent, and last month produced a net gain of just 88,000 new payroll jobs.
Meanwhile US home sales showed their biggest monthly fall in over 18 years in March, suggesting that the biggest drag on US economic activity is not over.
But other recent data has been firmer -- surveys on manufacturing and services have been above expectations, and factory orders rose 3.1 percent in March.
Inflation indicators remain a bit too hot for the Fed, which had brought rates up after of a long period of stimulation since 2001. Consumer prices were up 0.6 percent in March even though "core" prices, excluding food and energy, have been tamer.
Joel Naroff of Naroff Economic Advisors said he remained "hopeful, though not overly confident," about a message suggesting rates may be headed lower.
"There is little doubt that no change will be made in rates," Naroff said.
But he added that "the softer job gains and slowing wage increases would allow the [FOMC] members to hint at a potential rate cut. But they have not been that forthcoming in their comments so I suspect there may be some disagreement on how to proceed."
Gary Thayer, chief economist at AG Edwards, said he sees the Fed cutting rates this year if the economy fails to re-accelerate.
"If the economy continues to grow at a subpar rate this year as we expect, the risk of inflation is likely to decline," Thayer said. "Core consumer-prices inflation has also moved down toward the Fed's 1 percent to 2 percent comfort zone and could be down into that zone by later this year. Therefore, we continue to believe the Fed will cut short-term interest rates two or three times before the end of the year."
Scotiabank's Camilla Sutton said the weak data "continues to increase the odds that the Fed cuts more aggressively than the market has currently priced in."
The combination of weak GDP, lower core inflation and an uptick in the jobless rate "creates an environment where the likelihood of Fed cuts has increased," she said.
Joseph Balestrino at Federated Investors said he sees no action for now until the economic picture is clearer.
"There doesn't seem to be a need for rate action. The economy doesn't appear to need the stimulus a rate cut would provide," he said.
Balestrino said the soft conditions were in the first three months of the year and that "the Fed has said it expects the economy to re-accelerate later this year."
"Consumers continue to spend money. And they continue to earn it, with unemployment remaining low. At the same time, most foreign economies are trending higher than expected, giving our own a boost," he said.
Chief economist Ethan Harris at Lehman Brothers said the Fed will keep taming inflation as its top priority, and that this battle is not yet over.
"Not only is the FOMC serious about getting the core below 2 percent [annually], it does not want to declare victory on inflation prematurely," Harris said.
ROLLER-COASTER RIDE: More than five earthquakes ranging from magnitude 4.4 to 5.5 on the Richter scale shook eastern Taiwan in rapid succession yesterday afternoon Back-to-back weather fronts are forecast to hit Taiwan this week, resulting in rain across the nation in the coming days, the Central Weather Administration said yesterday, as it also warned residents in mountainous regions to be wary of landslides and rockfalls. As the first front approached, sporadic rainfall began in central and northern parts of Taiwan yesterday, the agency said, adding that rain is forecast to intensify in those regions today, while brief showers would also affect other parts of the nation. A second weather system is forecast to arrive on Thursday, bringing additional rain to the whole nation until Sunday, it
LANDSLIDES POSSIBLE: The agency advised the public to avoid visiting mountainous regions due to more expected aftershocks and rainfall from a series of weather fronts A series of earthquakes over the past few days were likely aftershocks of the April 3 earthquake in Hualien County, with further aftershocks to be expected for up to a year, the Central Weather Administration (CWA) said yesterday. Based on the nation’s experience after the quake on Sept. 21, 1999, more aftershocks are possible over the next six months to a year, the agency said. A total of 103 earthquakes of magnitude 4 on the local magnitude scale or higher hit Hualien County from 5:08pm on Monday to 10:27am yesterday, with 27 of them exceeding magnitude 5. They included two, of magnitude
CONDITIONAL: The PRC imposes secret requirements that the funding it provides cannot be spent in states with diplomatic relations with Taiwan, Emma Reilly said China has been bribing UN officials to obtain “special benefits” and to block funding from countries that have diplomatic ties with Taiwan, a former UN employee told the British House of Commons on Tuesday. At a House of Commons Foreign Affairs Committee hearing into “international relations within the multilateral system,” former Office of the UN High Commissioner for Human Rights (OHCHR) employee Emma Reilly said in a written statement that “Beijing paid bribes to the two successive Presidents of the [UN] General Assembly” during the two-year negotiation of the Sustainable Development Goals. Another way China exercises influence within the UN Secretariat is
Taiwan’s first drag queen to compete on the internationally acclaimed RuPaul’s Drag Race, Nymphia Wind (妮妃雅), was on Friday crowned the “Next Drag Superstar.” Dressed in a sparkling banana dress, Nymphia Wind swept onto the stage for the final, and stole the show. “Taiwan this is for you,” she said right after show host RuPaul announced her as the winner. “To those who feel like they don’t belong, just remember to live fearlessly and to live their truth,” she said on stage. One of the frontrunners for the past 15 episodes, the 28-year-old breezed through to the final after weeks of showcasing her unique