Fed expected to hold interest rates steady again this week

NEW YORK

The U.S. central bank is widely expected to keep interest rates unchanged at its policy meeting this week, as energy prices stay high and supply chains snarled due to war in the Middle East.

The Federal Reserve's two-day meeting, starting tomorrow, could be chairman Jerome Powell's last at the helm of the independent institution.

Fed officials are set to keep rates steady at a range between 3.5 percent and 3.75 percent, extending their pause since the start of the year.

"We still have a very high level of uncertainty on what's happening in the Middle East," KPMG senior economist Kenneth Kim told AFP.

Oil and gasoline prices remain elevated even if they have peaked, meaning "there's certainly an energy shock that's still impacting both consumers and businesses," he said.

Fed officials will likely focus more on containing inflation than the jobs market this meeting, with the war entering its ninth week.

Already, U.S. consumer inflation reached its highest level in nearly two years in March at 3.3 percent as energy costs rocketed.

Fed Governor Christopher Waller indicated this month that a prolonged conflict could make it hard for the central bank to cut rates this year.

If there were high inflation and a weak labor market, one would have to balance risks on both sides.

This "may mean maintaining the policy rate at the current target range if the risks to inflation outweigh those to the labor market," he told an Alabama event.

KPMG's Kim said solid hiring recently "gives the Fed some cushion" to temporarily focus more on prices.

Analysts will monitor if the Fed signals in its post-meeting statement that rate hikes are a possibility.