FOMC Preview: Even if interest rates remain unchanged, the Federal Reserve will not signal the end of the rate hike cycle.

Next week, the Federal Reserve will hold an FOMC meeting and make a decision on whether to adjust the current interest rates.

It is widely believed that although the Federal Reserve is likely to maintain interest rates and keep them stable at this meeting, they will avoid indicating that the current rate hike cycle has ended.

Bruce Kasman, Chief Economist at JPMorgan, said:

They cannot send a signal that the rate hike cycle has ended.

This is in stark contrast to the somewhat ambiguous message sent by the European Central Bank when it raised rates by 25 basis points on Thursday. Although ECB President Lagarde refused to disclose whether rates have peaked, investors interpreted the post-meeting policy statement as a signal that the ECB has completed its rate hikes.

The European Central Bank stated:

It believes that the key interest rates of the European Central Bank have reached a level that can be maintained for a sufficiently long period of time and will make a significant contribution to timely return of inflation to target.

In trader's terms, the message the Federal Reserve is likely to send next week is "hawkishly maintaining interest rates," rather than the "dovish rate hike" announced by the European Central Bank on Thursday.

Lagarde told reporters after the meeting that the eurozone is experiencing a period of "very, very slow economic growth."

Powell, speaking at the Jackson Hole Federal Reserve meeting on August 25, said the Federal Reserve is "monitoring signs that the economy may not cool as expected" as they strive to better align demand and supply and further reduce inflation.

The market expects the Federal Reserve to significantly raise its economic growth forecast for this year in the projections released after the meeting next week. In the Federal Reserve's last round of projections in June, based on the median forecast of Federal Reserve officials, the U.S. economy is expected to grow by 1% this year.

Some analysts believe that Powell announcing an explicit end to rate hikes would not be very beneficial. Given that the Federal Reserve will not raise rates in September, Powell is better off emphasizing that it is still possible to continue raising rates.

Analysts believe that the dot plot released by the Federal Reserve after the meeting may show that policymakers expect another rate hike this year, opening the door for a rate hike at the November or December meeting.

The market believes that the information Powell announces at the post-meeting press conference may be more subtle, indicating the progress the Federal Reserve has made in reducing inflation.

Market Focus: How long will high interest rates be maintained?

Nowadays, the market is more concerned about how long the Federal Reserve will maintain high interest rates.

Last week, Austan Goolsbee, a dovish official of the Federal Reserve and President of the Chicago Fed, said:

We will soon stop discussing how high interest rates should rise. What we need to discuss is how long we need to keep rates at this level to ensure that we are on the path to our target inflation rate.

We are balancing the recovery of supply and demand, and we have seen many components of inflation decline. But overall inflation levels are still higher than we would like.

We need to see this situation continue in order to truly feel that we are on the right track.

We know that inflation in the service sector is more persistent, so we hope to see progress in these areas. Fortunately, we have already started to see some signs. Federal Reserve "Number Three Figure" and President of the New York Fed, John Williams, also stated last month that he believes officials are nearing the peak, and a major issue the Fed faces is understanding how long they need to maintain a restrictive stance on policy.