The two-day meeting of the Federal Open Market Committee begins this Tuesday in which interest rates in this country are currently set in a range between 5.25 and 5.50%.
and rare There is great unanimity in the market to maintain interest rates at their current levels.
According to the opinion of Cristina Gavín Moreno, Head of Fixed Income at Ibercaja Gestión believes that “after the 25 basis point increase we experienced in July and despite the more hawkish tone expressed in Jackson Hole at the end of August, The market assumes that there will be no interest rate movements this session.
And consider this “The key once again lies in the message Powell is sending about his forecasts for the latter part of the year.”. However, we do not expect Powell to make any significant changes compared to previous messages, as he acknowledges that economic activity continues to grow moderately without changing the script on the health of the labor market and price developments.
Ibercaja Gestión emphasizes: “The interest lies in anticipating when we will see a change in the direction of the Federal Reserve and we can expect a decline in the type of intervention. According to our current scenario, this point in time will be postponed until mid-2024 at the earliest.”
A beginning of the end, what 99% are betting on This is reflected in the appreciation of the most visited tool in this area, that of the CME Group. What there isn’t as much agreement on is that this surge will clearly be the last.
There is still a lot to do between this tool and the meeting in November. At the moment, 68.9% believe interest rates in the United States will remain at current levels, but 30.8% believe they will rise at 25 basis points.
While they confirm from Link Securities that “we are choosing a Fed.” will be optimistic about the development of the US economy and is not entirely satisfied with the behavior of inflation, although it will reiterate that the deflation process is taking its course.”
And they point out that the FOMC (the Fed’s Federal Open Market Committee) and its chairman Jerome Powell are “on the mend” after indicating that the process of raising interest rates may be nearing an end. We believe that They will open the door for new actions regarding species, that they will not take it for granted as long as the macroeconomic data, especially inflation, requires it.”
And also from this company they open the door to what the market is really still waiting for: the date when interest rates in the United States begin to fall. From Link they assume that “it will be crucial to check this.” If the intentions shown in June to cut key interest rates by one percentage point in 2024 are maintained in the chart or, on the contrary, as is likely to happen, the members of the FOMC will delay the start of the rate cutting process in a timely manner.”
That is, it complements the ECB’s statement: suggesting that high interest rates will continue for much longer, Or the cuts will begin even sooner than the market expects.
And another problem will be your clues to the expected “soft landing” of the US economy. Erik Weisman, chief economist and portfolio manager at MFS Investment Management, emphasizes this “Where the economy will ultimately end up remains a mystery”
In his view, “the path to a soft landing appears to have improved, due to both weak inflation and the labor market slowdown.” However, much of the delayed monetary tightening remains to be seen. And even if the Fed ends its rate hike cycle this week “The impact of the last 16 months of tightening could still push the US into recession.”
