abrdn: Fed easing cycle is imminent
abrdn: Fed easing cycle is imminent
Luke Bartholomew, Senior Economist at abrdn, comments on yesterday's Fed meeting.
The Fed’s hike today was widely expected, so the most interesting aspect of today’s decision was always going to be what the Fed said about the likely future path of rates. In removing language from its statement that pointed to more hikes ahead, the Fed is pointing to a likely pause in rates at the current level. A pause makes sense as the Fed tries to assess the impact of its tightening on credit conditions on the one hand, against the risk that inflation will stay too high on the other.
We think the most likely move after this pause is that the Fed cuts rates later this year. There is certainly a risk that persistently strong inflation data will force the Fed to push rates higher later this year. But we think the economy is heading into a recession, and this will ultimately see the Fed deliver a significant easing cycle.