The Federal Reserve (Fed) is on the cusp of its first interest rate reduction since the onset of the pandemic in early 2020, a move that would lower borrowing costs and potentially bolster natural gas infrastructure development.
Depending on the tone set by Fed policymakers as they culminate their two-day meeting on Wednesday, however, the expected shift on rates also could spur fresh concern about the fragility of the U.S. economy. Analysts said any signal of aggressive rate cuts in coming months could indicate worry that a vulnerable economy needs Fed intervention to avoid a recession. A downturn could curb commercial and industrial activity, and this, by extension, could diminish demand for natural gas.
“We expect the language in the policy statement to change significantly, reflecting a shift in the balance of risks to the downside for the labor market and towards greater confidence in achieving the 2% inflation goal over time,” Jefferies analyst Thomas Simons said. “This will set the stage for additional rate cuts at upcoming meetings.”
