Fed unlikely to push interest rates higher barring a larger reacceleration in inflation – RBC Economics
Economists at RBC Economics do not expect the Federal Reserve to deliver more rate hikes.
Monetary policy at its current level is already very restrictive
Easing inflation pressures in the US against a resilient macroeconomic backdrop have been encouraging and have raised hopes that inflation can slow back to the Fed’s 2% inflation objective without a substantial deterioration in the economy. We still think that is unlikely, given early signs that consumer purchasing power is already taking a hit.
Household financial cushions are thinning, and delinquencies are already on the rise. Elevated interest rates will continue to suppress credit demand, making it more challenging to borrow to support spending. Indeed, monetary policy at its current level is already very restrictive.
Absent a larger reacceleration in inflation, the Fed is unlikely to push interest rates higher. We expected the Fed will keep rates steady into 2024 while waiting for more signs of a softening economy to show up.
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FXStreet Insights Team
FXStreet
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