US: Fed raises rates 25 bps… more to come?

Senior Economist at UOB Group Alvin Liew reviews the latest FOMC event, where the Federal Reserve hiked rates by 25 bps, as widely expected.

Key Takeaways

“The Federal Reserve (Fed) in its 21/22 Mar 2023 Federal Open Market Committee (FOMC) meeting, unanimously agreed to keep to its rate hike pace of 25bps, same as Feb FOMC, lifting the Fed Funds Target Rate (FFTR) to 4.75%5.00%. This is the highest level of FFTR since Sep 2007.”

“In the monetary policy statement (MPS), the Fed kept its text on the economy, was more bullish on labor market but it included a mention about the US banking system and more importantly, a key part of the FOMC statement has been adjusted to: ‘the Committee anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time’ which sounded less assertive compared to the previous statement that ‘ongoing increases in the target range will be appropriate’ (in the Feb FOMC).”

“For the Dotplot, the median terminal rate forecast was unchanged at 5.1%, and only one Fed official put his/her dot below 5%, with most of the members’ dots coalescing just above 5%, suggesting expectations of at least one more 25-bps hike at this juncture, while seven members expect 50 to 75 bps of hikes. And for the Summary of Economic Projections (SEP), while the FOMC members remained concerned about near term inflation pressures, growth outlook is increasingly weighted on the downside, implying more negative impact from its rate hiking cycle.”

“FOMC Outlook – One More and Done At 5.25%? In light of the ‘less assertive’ language change in the FOMC statement and Powell’s comments (on possible tightening in credit conditions may mean monetary tightening has less work to do), we are adjusting our terminal FFTR level lower to 5.25% (previous: 5.75%), factoring in a final 25bps hike at the May 2023 FOMC meeting. We expect no rate cuts this year and this terminal rate of 5.25% to last through 2023.”

Share: Feed news

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. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.