Monex Europe: Markets don't consider the possibility of the FOMC debating another rate hike

30 oktober 2023

Fed

Monex Europe provides its forecasts for this week’s meeting of the Federal Reserve and the Bank of England.

Fed meeting – a non-event for markets, focus on December meeting

Despite the economic data, markets aren’t even considering that a debate on another rate hike could be had by the FOMC this week.
We expect Chair Powell to highlight the progress made in returning inflation to 2%, that higher bond yields could substitute for a further rate hike this year, but that the Fed is still attentive to any upside inflation risks and will act accordingly.
This should result in the meeting being a non-event for markets, similar to the ECB decision last week. This will leave the dollar at the mercy of growth differentials, developments in Treasuries, and overall risk sentiment.
The focus for markets has quickly moved onto the December meeting, where the evolution of the labour market and growth conditions in the fourth quarter will prove crucial in determining whether a final rate hike is delivered or not.

BoE meeting – bank rate to remain at 5.25%

The Bank of England stunned markets in September by keeping policy rates on hold in a tight 5-4 decision. We now expect the MPC will deliver a repeat decision next week to far less surprise with a 6-3 majority, in line with market consensus that sees Bank Rate remaining at 5.25%.
Since the last BoE decision, further cooling across most key data releases has done little to suggest a need for further hikes, even if the flash September PMI release that seemed to alarm policymakers was subsequently revised upwards.

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