Fed Analysis: Powell promises rates to stay higher for longer, USD set to extend gains
Premium|Take advantage of 50% OFF on your first month.
Start your subscription and get access to all our original articles.
You have reached your limit of 5 free articles for this month.
Get Premium without limits for only $9.99 for the first month
Access all our articles, insights, and analysts.
UNLOCK OFFER- The Federal Reserve has signaled another rate hike may come in 2023.
- Significant upgrades to for the next periods are set to keep US Dollar gains sustained.
- Rejecting a soft-landing scenario may add pressure on stocks.
"Proceed carefully" – these words have meant a different thing today. The Federal Reserve (Fed) may raise rates more slowly, but the same logic works for rate cuts. That scares investors, and more may be in store.
While the Fed left interest rates unchanged, it went beyond leaving the door open to another increase this year. The bank raised its borrowing cost forecasts for 2024 to 5.1% from 4.6%, indicating only two rate cuts instead of four projected in its previous outlook.
Looking further into the future, officials converged around a median estimate of 3.9% in 2025, above the 3.4% originally forecast. Even in 2026, there is at least one member who sees rates hovering close to 5%.
For people planning to buy homes or businesses eyeing multi-year investments, the Fed provides fresh cold winds. The central tendency for the longer run has widened from 2.5-2.8% to 2.5-3.3%. The range is not only higher but also wider – investors hate uncertainty even more than higher rates.
What is next for the US economy? The Fed aims for a soft landing – aka no recession – but it is not its baseline scenario, according to Chair Jerome Powell. That means it will stomach hard years to see inflation coming down.
All in all, the Fed has delivered a major "hawkish hold" – setting the stage for sustained US Dollar strength beyond the knee-jerk reaction. For stocks, the lack of conviction about a soft landing adds further pressure.
- The Federal Reserve has signaled another rate hike may come in 2023.
- Significant upgrades to for the next periods are set to keep US Dollar gains sustained.
- Rejecting a soft-landing scenario may add pressure on stocks.
"Proceed carefully" – these words have meant a different thing today. The Federal Reserve (Fed) may raise rates more slowly, but the same logic works for rate cuts. That scares investors, and more may be in store.
While the Fed left interest rates unchanged, it went beyond leaving the door open to another increase this year. The bank raised its borrowing cost forecasts for 2024 to 5.1% from 4.6%, indicating only two rate cuts instead of four projected in its previous outlook.
Looking further into the future, officials converged around a median estimate of 3.9% in 2025, above the 3.4% originally forecast. Even in 2026, there is at least one member who sees rates hovering close to 5%.
For people planning to buy homes or businesses eyeing multi-year investments, the Fed provides fresh cold winds. The central tendency for the longer run has widened from 2.5-2.8% to 2.5-3.3%. The range is not only higher but also wider – investors hate uncertainty even more than higher rates.
What is next for the US economy? The Fed aims for a soft landing – aka no recession – but it is not its baseline scenario, according to Chair Jerome Powell. That means it will stomach hard years to see inflation coming down.
All in all, the Fed has delivered a major "hawkish hold" – setting the stage for sustained US Dollar strength beyond the knee-jerk reaction. For stocks, the lack of conviction about a soft landing adds further pressure.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.