Why do markets care about the Federal Reserve meeting when no change in rates is expected?

It is widely expected that the Federal Reserve will keep the benchmark interest rate steady when it meets next week, so all eyes will be on what Fed officials say about their future plans.

Market Expectations

With inflation continuously declining, the Fed has a reason to lower interest rates next year, potentially as early as March, according to market forecasts.

Impact of Interest Rate Hikes

Fed officials are likely to emphasize the possibility of future interest rate hikes if inflation does not drop to an annual rate of 2%.

Impact of Rate Hikes on the Economy

Fed officials acknowledged that hiking interest rates to combat inflation has severely impacted the economy and could lead to a significant slowdown and cause a recession.

Impact of Interest Rates on Financial Markets

If participants in financial markets believe that the Fed is on the verge of lowering interest rates – which typically helps companies – stock prices may rise and interest rates may fall, making money easier to obtain and undermining the Fed’s efforts to combat inflation.

Impact of the Fed’s Reputation

The Fed’s reputation may play a role in decisions about when to lower interest rates and what to say about it. The Fed was criticized in 2022 for being slow to address the first signs of rising inflation, and Powell and other officials may be willing to wait longer to cut rates just to avoid the appearance of looking foolish if inflation rises again.

Source: https://www.investopedia.com/why-markets-care-about-a-federal-reserve-meeting-where-no-rate-change-is-expected-8413732