2023-06-15 16:27:00
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Markets ended the day flat following the Fed’s hawkish pause
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The pause by the Fed will help assess the effects of previous hikes on the economy
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There are still some increases on the table before the end of 2023
As expected, the Fed raised interest rates for the June meeting, keeping them in the range of 5-5.25%.
In terms of future rates, there was an increase from 5.1% to 5.6%, which indicates the possibility of two more increases of 0.25% by the end of 2023 (possibly in July and December?).
Market expectations for the federal funds rate
Powell stated that, in addition to the usual topics such as targeting inflation around 2% and maximizing jobs, there has been an iteration of the quantitative tightening approach.
It was also confirmed that all future decisions will be taken on a meeting-by-meeting basis, taking into account the data analyzed.
The reason for the pause in rate hikes was to assess the (lagging) effects of the previous 10 hikes on the economy.
Currently, there are indications of a better balance between supply and demand in the economy, particularly in the labor market and the real estate sector. However, these improvements are still not considered sufficient by the Fed.
However, upon closer examination, it seems illogical to consider a rate hike in July. This is because many indicators are expected to decline inflation Significantly major next month.
It is really strange that the price hike didn’t happen when it was at 4%, it was at 5.3%. It raises the question of why we would consider raising rates when the expected CPI is 3% and the core CPI is expected to be 5% in July. However, only time will tell.
Meanwhile, the markets closed practically flat yesterday (following a good performance on Tuesday), but it will be important to wait until the end of the week to get a better idea.
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