La Française: No rush to cut interest rates – pushback is likely

La Française: No rush to cut interest rates – pushback is likely

12 december 2023

Rente Monetair beleid
Fed dollar (kreatikar, Pixabay)

The Federal Open Market Committee (FOMC) is expected to maintain current interest rates at their upcoming meeting. Fed Chair Powell will stress the dependence of monetary policy on economic data. While some minor dovish changes in the statement are expected, hinting towards lower Fed fund rates by 2024 and 2025, no significant changes are foreseen.

Expectations:

  • The Fed's benchmark rates to remain between 5.25% to 5.50%.
  • Jerome Powell might hint at a potential rate hike if needed.
  • Acknowledgment of some progress towards the inflation target, but Fed Chair Powell will caution against premature rate reductions.
  • The Fed’s balance sheet reduction schedule should remain as is, at $95bn per month.
  • Dot Plot forecasts: Lower median dots for 2024, 2025 and 2026 (-25bps across the curve).
  • 2023 growth forecast revised to 2.5% but unchanged for 2024 to 2026.
  • Expected downward revisions of median headline and core inflation expectations for 2023, 2024 and 2025.

Overall, Fed Chair Powell is likely to maintain a balanced stance, aiming to curb expectations of early interest-rate cuts in 2024. However, convincing market participants might prove challenging given the rapid decline in inflation towards the 2% target. External factors, such as upcoming CPI figures, bond auctions or treasury announcements may wield more influence over fixed income markets than the FOMC press conference.

Gerelateerde berichten