US Fed Meeting Today: PIMCO Warns Market Ignoring Recession Risk; Here's What To Expect From Today's Meeting

As Investors are cautiously awaiting the decision of the US Federal Reserve on future interest rates in its meeting due today, Pacific Investment Management Company LLC (PIMCO), an American investment management firm has flagged an elevated chance of another hike before the year-end.

According to a report by the Mint, PIMCO believes that the market may be ignoring the risk of at least one more interest rate hike from the US Fed before the year-end and a looming US recession, safe-haven assets may be preferred plays at this juncture. A Bloomberg report quoted PIMCO as saying that "Markets may be underestimating the risks of both a US recession and one more interest-rate hike from the Federal Reserve, making haven assets a preferred play."

"There's still a fairly elevated chance of another hike before the year-end. Higher for longer is likely the mantra for US rates as inflation will remain a little bit stickier than expected," Bloomberg quoted Geraldine Sundstrom, a managing director and portfolio manager in PIMCO London office, saying so.

Soft landing is definitely possible. A mild recession is also a decent probability," she said, according to Bloomberg.

What to expect from the US Federal Reserve meeting?

There are widely held speculations that the US Federal Reserve will keep the interest rates unchanged as it announces its policy decision later today. The two-day Federal Open Market Committee (FOMC) meeting started on Tuesday and its outcome is due later today. According to CME Group data, Markets are pricing in just a 1% probability of what would be the 12th rate hike since March last year. The US central bank has been on an interest rate hike spree since March 2022 and this will probably be the second time since then that the Federal Reserve may opt for a pause on interest rate hikes.

Meanwhile, ahead of a much-anticipated rate decision by the Federal Reserve later in the day, the US dollar remained firm on Wednesday. The US dollar index, which measures the currency against a basket of other currencies, remained firm at 105.10 with investors cautiously awaiting the Fed's rate decision.