The Federal Open Market Committee (FOMC) delivered its third straight 75 bps increase. Economists at HSBC now expect another 75 bps hike in November and continue to look for USD strength ahead.
More supersized hikes
“We now expect additional rate hikes of 75 bps in November, 50 bps in December, and a final 25 bps hike in February 2023, taking the federal funds target range up to 4.50-4.75%. The risks for policy rates may still be skewed to the upside, given sticky and elevated inflation.”
“The USD should be well supported by the three pillars of our framework,. First, the Fed has indicated that there is still much work to be done to rein in inflation to target. Second, a higher ‘peak rate’ is helpful for the USD. It is also clear that the Fed views slower growth as a likely and necessary part of this endeavour. With other global central banks operating with a similar mindset, the resultant challenging outlook for growth is likely to remain similarly USD positive. Third, the combination of these first two factors is likely to hamper risk appetite, boosting the ‘safe-haven’ USD.”
“We believe the September FOMC outcome has materially bolstered the bullish case for the USD.”
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