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The U.S. Federal Reserve is poised to maintain its current interest rate range of 5.25% to 5.50%, according to analysts at DZ Bank Research. However, they suggest that despite this anticipated decision, the central bank is likely to signal a forthcoming rate increase. This expectation is rooted in several factors, including the sustained strength of the labor market, recent inflation upticks, and robust retail sales.

DZ Bank Research highlights that the labor market is gradually cooling rather than rapidly, contributing to the Fed’s confidence in its future monetary policy. Moreover, the recent uptick in inflation and strong retail sales figures further bolster the case for potential rate adjustments.

While money markets currently place a 99% probability on the Fed keeping rates unchanged in the upcoming decision, they are also pricing in an additional 11 basis points increase for the remainder of the year, as per Refinitiv data.

As we await the Federal Reserve’s decision, it’s evident that the central bank’s outlook remains dynamic and responsive to evolving economic conditions. The possibility of a rate hike in November and a shift towards a higher long-term interest rate level underscores the complexity of the Fed’s role in shaping the economic landscape. Markets will undoubtedly be closely monitoring any signals provided by the Fed during this pivotal moment in monetary policy.