Great anticipation for the Fed meeting on Wednesday. The central bank, according to consensus expectations, should increase rates by 75 points, bringing the reference rate in the 2.25-2.5% range.
“Inflation expectations have not increased, but they remain high. As a result, all the signs that the Fed has indicated as relevant remain in overheating territory and the moves and tone will be hawkish, ”Algebris’ Global Credit Bullets noted today.
The household survey and GDP leading indicator are less positive and point to a moderate slowdown in the third quarter, in line with global data. “It is probable that the Fed, for the moment, does not give too much importance to these data and that it awaits signs of moderation in inflation before adopting a less rigid position – continues Algebris -. There are two inflation releases ahead of the September meeting and our model points to a sizable downside (more on our recent Algebris Bullet – Fight Your Fears), amid the easing of supply-side restraints ”.
Algebris therefore believes that the tone of September could be radically different, finally opening up to a less rigid policy in the following months.