U.S. stocks opened slightly lower Tuesday, with traders readying for the Federal Reserve’s interest rate decision Wednesday, as well as the central bank’s comments on where interest rates will go next as inflationary red flags remain.
The central bank is fully expected by the market to leave its policy interest rates at a range of 5.25% to 5.50% after its meeting on Wednesday, but traders are wary about accompanying guidance on any future rate rises amid stubborn inflationary pressures, a concern that sees 10-year benchmark Treasury yields BX:TMUBMUSD10Y holding near their highest level since 2007.
In another look at economic conditions Tuesday morning, U.S. housing starts fell 11.3% in August after a revised 2% gain in July. Starts dropped to their lowest level since June 2020, with demand crimped by mortgage rates over 7%. At Vanguard, Chief Global Economist Joe Davis said a “soft landing is still possible, but not probable in our view, as it would require an unlikely ‘painless disinflation process,’ toward target without a slowing of demand in the economy.”
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