FOMC tees up a rate hike for march

Wells Fargo Research Team Wells Fargo

Summary

As was widely expected, the FOMC made no major policy changes at its meeting today. Specifically, the Committee unanimously agreed to keep its target range for the federal funds rate unchanged at 0.00% to 0.25%.
But the Committee also teed up a rate hike in March when it stated that "it will soon be appropriate to raise the target range for the federal funds rate."
We look for the FOMC to hike rates by 25 bps per quarter between Q1-22 and Q3-23—a total of 175 bps—but acknowledge that the risks seem skewed toward the FOMC moving at a faster pace and/or by more than we currently forecast if inflation remains uncomfortably high.
The FOMC also released a document entitled "Principles for Reducing the Size of the Federal Reserve's Balance Sheet." These principles, in conjunction with statements that Chair Powell made in his post-meeting press conference, suggest that the Committee will not rush headlong into shrinking its balance sheet, but that it is moving closer.
We expect that the FOMC will announce at the September policy meeting that it will begin balance sheet reduction in the fourth quarter, and that the amount of run-off will accelerate over the subsequent few months.

Download the full report

Author

Wells Fargo Research Team

Wells Fargo

AUD/USD rises to 0.6950 as USD slips on Fed's Warsh

AUD/USD regains traction and extends the bounce toward 0.6950 in the Asian session on Friday. Fed Chair Warsh's comments reinforce the selling pressure on the US Dollar, allowing the pair to stretch higher. Warsh said that he remains committed to delivering price stability without giving away anything on future interest rate path.

USD/JPY falls in symc with USD, gives up 158.00 after Warsh's speech

USD/JPY has come under fresh selling pressure and gives up 158.00 in the Asian session on Friday amid the emergence of fresh US Dollar selling. Fed Chair Warsh's non-committal commentary on the future tightening path, weighs on the US Dollar and the pair.

Gold extends gains nearing $4,200 as US Dollar struggles

Gold heads north for the second consecutive day, trading near $4,180, with bulls aiming for the $4,230 area, the top of October’s trading range. Precious metals have been boosted by lower US Treasury yields and dovish comments from Federal Reserve officials this week, which have undermined speculative support for the Greenback.

Busy week for Ripple’s RLUSD: What changes for stablecoin holders?

Ripple’s RLUSD is gaining ground across institutional finance, with a major bank launching custody services, a new wallet integration making it easier for developers to build payments and agentic experiences on the network, and a brokerage platform planning to use the stablecoin for settlement.

Hot inflation, falling yields: A new test for global markets

Global markets are confronting a difficult combination: renewed inflation pressure, expensive capital and growing scrutiny of the investment supporting the AI boom. The most revealing development this week was the demand for government bonds even as US inflation accelerated. My assessment is that investors should treat this as a test of financing resilience.

Everyone's dumping Gold after hot US inflation. Here's why $4,100 could be a floor, not a cliff

Gold (XAU/USD) is recovering from a sharp sell-off triggered by hotter-than-expected United States (US) inflation data released on Wednesday. The precious metal briefly plunged toward $4,073 as investors increased their bets on further Federal Reserve (Fed) interest rate hikes before recovering as US Treasury yields and the US Dollar (USD) reversed their initial gains.