Home Business Fed-Day today: fight against inflation, preview on rates and what Powell will say (and not say)

Fed-Day today: fight against inflation, preview on rates and what Powell will say (and not say)

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Fed-Day today: fight against inflation, preview on rates and what Powell will say (and not say)

Today, Wednesday, July 27, is finally Fed-Day, the day on which the American central bank led by Jerome Powell, at the end of a two-day meeting, will announce its decision on US interest rates.

Some analysts do not rule out a new monetary tightening, by the Federal Reserve led by Jerome Powell, of 100 basis points, aimed at combating galloping inflation in the US. On average, the forecast is for a rate hike of 75 basis points from the current range of 1.50% to 1.75% in order to counter runaway inflation. With the obsessive fear of a hard landing recession, even a lower squeeze, equal to +50 basis points, cannot be ruled out.

Thus François Rimeu – Senior Strategist La Française AM – in his note “Pre-FED: rate hike by 50, 75 or 100 basis points?”

“We expect the Federal Open Market Committee (FOMC) to raise rates by 75 basis points at the next meeting to a range of 2.25% -2.5%, the Fed’s long-term neutral rate estimate. We do not expect a 100 bps hike despite the strong CPI (Consumer Price Index) in June as inflation expectations have dropped. President Powell will most likely reiterate that the committee must have ‘clear and convincing’ evidence that inflation is falling before easing policies. “

Rimeo continues:

“(Powell) probably won’t give too much information on the size of the September hike to keep all options open. It is likely that President Powell will confirm the doubling of the quantitative tightening rate in September, bringing it to 95 billion dollars per month (60 billion dollars in Treasuries and 35 billion dollars in mortgage-backed securities) ”.

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In conclusion, “the next meeting should be a confirmation of the Fed’s reliance on data and should not have a significant impact on financial markets. We expect the Fed to maintain an aggressive stance in order to restore price stability, with a slightly more balanced tone given the weakness of the incoming data ”.

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