The Fed vs Inflation

Fed vs inflationen

 

Fed chief Jerome Powell. Jacquelyn Martin/AP  

 

The Fed vs Inflation 

The Federal Reserve leaves the key interest rate unchanged  

 

The Federal Reserve leaves the US key interest rate unchanged in the range of 5.25-5.50 percent after a unanimous decision.  

 

In addition, the interest rate path will be raised for the next few years. In the long term, however, the forecast remains at 2.5 percent. The majority of members see another increase this year. The forecast indicates two reductions in the next year, which is two fewer than what was communicated in June.  

 

The committee notes that economic activity has been expanding at a solid pace, according to recent data. At the same time, job growth has moderated, although it remains resilient. 

 

In just over a year, the central bank has raised the interest rate from 0 percent to today's range, spread over eleven increases. 

 

Archive image. Seth Wenig/AP  

 

Economists: Hawkish pause – Fed does not want to see stock market rally  

 

The Federal Reserve's announcement to leave the policy rate unchanged but to raise the interest rate path was "a hawkish pause as expected". That's what Max Matthiessen's chief strategist Jon Arnell writes at X after the announcement. 

 

SEB's senior economist Robert Bergqvist predictably calls the Fed a "well-oiled mora bell". Like Arnell, he notes that the Fed members are flagging for another rate hike. The central bank "now does not want to see a stock market/interest rate rally", writes Bergqvist in a tweet.  

 

Archive image. Seth Wenig/AP  

 

The market less hawkish – think interest rates have peaked  

 

Despite a majority of Fed members signaling another interest rate hike, the market is still pricing in that we have reached the top. 

 

Futures trading on the interest rate announcements shows that the share betting on a higher interest rate in November has increased to 32 percent from 29 yesterday, according to CME's Fedwatch tool. But the market is still pricing in 68 percent that the interest rate will remain at the next announcement.  

 

At the year's last interest rate announcement in December, the market prices almost 56 percent that the interest rate will remain - yesterday that figure was just over 59 percent. At the same time, according to futures traders, the chance of a hike in December has increased to 38 percent from 36 percent yesterday.  

Movements were small on both Wall Street and the two-year Treasury yield after the announcement.

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