Fed Halts Rate Hike
After ten consecutive rate increases over the past 15 months, the United States Federal Reserve has left the Fed Funds target rate unchanged at 5-5.25%. Though, Fed left US interest rates unchanged but signals more hikes are on the cards with some hawkish projections for the economy. July is a ‘live’ meeting, according to Powell.
This was the widely expected outcome after yesterday’s consumer price index (CPI) report, and today’s PPI data resulted in just 2-3b basis points of hikes priced ahead of time, while only 6 out of 109 organisations polled by Bloomberg expected a hike.
This was a unanimous decision despite several hawks discussing the need for further rate hikes in advance. However, they clearly made their views known with the accompanying updated forecasts taking a decidedly hawkish tone.
The March dot plot indicates rates had probably peaked, but these June forecasts show that two further rate rises are the expectation before they reverse course in 2024 with 100bp of rate cuts.
Looking at the individual numbers, nine members expect 50bp of hikes, with two looking for 75bp hikes and one looking for 100bp. Four members expect one hike, and just two look for rates to be held steady through the year’s end.
To rationalise this, they’ve revised up their fourth quarter Year-on-Year GDP growth from 0.4% to 1% and lowered their 4Q unemployment rate forecast from 4.5% to 4.1%.
They have also revised higher the 4Q core PCE deflator to 3.9% from 3.6%.#Fed Halts Rate Hike Naira Steadies as Banks Issue Update on FX Purchase
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