US Fed rate decision: Likely to remain on pause and pare back rate cut expectations

The US Federal Reserve is likely to keep interest rates unchanged this week, but could pare back the number of cuts it has penciled in for this year, as policymakers digest a mixed bag of economic data.

Stalled progress against inflation and a robust labor market have pushed many analysts to predict that the rate-setting Federal Open Market Committee (FOMC) will not cut interest rates from their current 23-year high before September at the earliest.

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A September start to cuts would likely increase the gap between the Fed and the European Central Bank (ECB), which began easing monetary policy rates last week.

"Data released since the last meeting indicate that the threat of price re-acceleration due to strong economic activity has diminished somewhat," Wells Fargo economists wrote in a recent note to clients.

"However, we share the universal expectation that the FOMC will keep its target range for the federal funds rate unchanged at 5.25%-5.50% at the conclusion of its policy meeting on June 12," they said.