Federal Reserve to Resume Rate Hikes After June Pause

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Federal Reserve to Resume Rate Hikes After June Pause

Yahoo Finance2023-07-24

After taking a breather in June, the Federal Reserve is all but assured to raise interest rates by another 0.25% this week with Fed Chair Jay Powell expected to leave the door open to additional rate ...

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SudTradepro
·2023-07-24
A Market crash soon coming .. earnings are beginning to be squeezed and rates are still high
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A press conference with Powell will begin 30 minutes later.Data from the CME Group shows traders assigning a 99.8% chance on the Fed raising rates by 0.25% on Wednesday.Unlike the Fed's June announcement this week's decision will not be accompanied by updated economic projections from central bank officials. Those forecasts last month suggested two more rate hikes would be needed in 2023 to bring inflation back to the Fed's 2% target.Fed officials in recent weeks have reiterated forecasts that this week's rate move will be the beginning of a two-step process to bring rates to their peak.\"Since the June meeting, with another month of data to evaluate lending conditions, I am more confident that the banking turmoil is not going to result in a significant problem for the economy, and I see no reason why the first of two hikes should not occur at our meeting later this month,\" Fed governor Chris Waller said in a speech on July 13.Powell also recently made the case for more rate hikes based on the latest economic data.\"If you look at the data over the last quarter, what you see is stronger than expected growth, a tighter than expected labor market, and higher than expected inflation,\" Powell said during a panel discussion in Portugal in the end of June. \"So that tells us that although policy is restrictive, it may not be restrictive enough and it has not been restricted for long enough.\"\"At this point, it is important for the FOMC to follow through on the signal we sent in June,\" Dallas Fed President Lorie Logan said in a July 6 speech. Logan is a voting member of the FOMC this year.San Francisco Fed President Mary Daly also said she advocates two more hikes this year.\"I was in favor of slowing the pace off tightening, but also realizing that we're likely to need a couple more rate hikes over the course of this year to bring inflation down,\" Daly said during a conversation at the Brookings Institution in Washington earlier this month. \"The risks of doing too little outweigh risk of doing too much, but that gap is getting narrower.\"Wall Street's mixed outlookSome Wall Street economists, however, expect Wednesday will mark the end of the Fed's aggressive rate hiking cycle which began in March 2022.\"A run of softer inflation readings over the next few months will convince the FOMC to scrap plans for further tightening beyond that, with the Fed’s next move likely to be a rate cut next year,\" Andrew Hunter, deputy chief US economist at Capital Economics, wrote in a note last week.Earlier this month, inflation data showed consumer prices in June rose at the slowest pace since March 2021 with headline CPI rising 3%. On a \"core\" basis — which strips out the costs of food and gas — inflation rose 4.8% over the prior year. The Fed targets 2% inflation.\"Core\" PCE, the Fed's preferred inflation measure, showed prices rose 4.6% over the prior year in May. June PCE data is due out at the end of this week.Luke Tilley, chief economist at Wilmington Trust, told Yahoo Finance he also sees July marking the end of the Fed's rate hiking campaign. Tilley pointed to inflation that has declined — and which in his view will likely come in below the Fed's forecasts in the coming months — with falling rents dragging inflation down sharply in the final quarter of the year.Given these dynamics, Tilley thinks this week's rate hike will be a step too far.\"I think that the current rate should be the peak,\" Tilley said. \"I actually think that they've sort of gone a little bit more than they needed to.\"In contrast, the economics team at Bank of America Global Research led by Michael Gapen expects the Fed to follow its current forecast, raising rates this week and once more before the end of the year. Even though Powell is likely to downplay the future during his press conference.\"Even though we expect the Fed to retain upward bias to its policy rate path, Powell won't have much to say in the way of how much, if any, and when any additional policy rate hikes may take place,\" the firm wrote in a client note last week.\"Our view is that the Fed will lift its policy rate by 25bp in September for the last hike of the cycle, but we cannot rule out that the hike comes at the November or December meeting.\"Still, despite believing the Fed may be going a step too far, Tilley has grown more optimistic the economy could achieve a so-called \"soft landing,\" in which inflation comes back to the Fed's target without the economy tipping into recession.\"I've gone to basically a coin flip of 50-50 that we could be moving to a soft landing base case extremely soon,\" Tilley said. \"I'm on the more optimistic side of things [that] as the inflation data has come down, even with a strong labor market, [a soft landing] just becomes increasingly the case.\"","kind":null,"is_publish_news":true,"is_publish_highlight":true,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[{"id":201444780343312,"gmtCreate":1690208395448,"gmtModify":1690208399190,"author":{"id":"3574923825314211","authorId":"3574923825314211","authorIdStr":"3574923825314211","name":"SudTradepro","avatar":"https://community-static.tradeup.com/news/9e0fa136da88290ea3b9970d5c2d6551","vip":1,"crmLevel":8,"crmLevelSwitch":1,"idStr":"3574923825314211"},"htmlText":"A Market crash soon coming .. earnings are beginning to be squeezed and rates are still high","listText":"A Market crash soon coming .. earnings are beginning to be squeezed and rates are still high","text":"A Market crash soon coming .. earnings are beginning to be squeezed and rates are still high","images":[],"top":1,"highlighted":1,"essential":1,"paper":1,"likeSize":1,"commentSize":0,"repostSize":0,"link":"https://ttm.financial/post/201444780343312","repostId":1196179511,"repostType":2,"isVote":1,"likeStatus":false,"favoriteStatus":false,"reportStatus":false,"tweetType":1,"langContent":"EN"}],"hasMoreComments":true,"newsSizeData":{"likeSize":19,"commentSize":1,"repostSize":1,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false}}