To make borrowing more expensive, the Federal Reserve has raised interest rates six times this year, including four extraordinary 0.75 point increases, to currently stand in a range of 3.75 to 4%.
“We think the stage is set for a (half point) increase this month,” said Oren Klachkin, an analyst at Oxford Economics, noting that interest rate sensitive sectors such as housing and inflation show relaxation signals.
The decision will be announced after a two-day meeting of the Fed’s Monetary Policy Committee (FOMC), which begins on Tuesday the 13th.
Policy makers in the United States are closely watching wage growth, fearing that higher wages will add to inflationary pressures.
“The Fed’s main concern is really wage growth,” said Martin Wurm, an analyst at Moody’s Analytics.
“That doesn’t necessarily mean that (the reference rate) will keep going up forever, but it does mean that it will go up a bit and… it will stay high for the next year,” Wurm told AFP.
With a higher benchmark rate, it becomes more expensive to borrow money for major purchases, like cars and property, or to expand businesses.
“Signs of Stress”
Despite the Fed’s crackdown, US consumer inflation was 7.7% year-on-year in October, while job creation remained strong, leaving markets nervous about the central bank continue his aggressive campaign.
“The strong labor market, rising wages and robust household balance sheets…are key areas of support” for demand, said ING economist James Knightley.
