2023-09-30 11:15:01
Jerome Powell, here accompanied by Ben Bernanke, the former director of the Federal Reserve (2006-2014), aims for “inflation sustainably at 2%”. (© FED)
The Fed has paved the way for further monetary tightening before the end of the year. American growth is stronger than expected.
A better than expected economic situation and a less favorable outlook for interest rates. This is how we could summarize the latest observation made by the American Federal Reserve, at the end of the meeting of its Monetary Policy Committee (FOMC).
Presented on September 20, it had the effect of a cold shower on the financial markets. The decision – taken unanimously – to keep key rates unchanged, in a range of 5.25-5.5% for “fed funds”, was fully anticipated.
But the message of firmness concerning the evolution to expect from monetary policy over the coming months was much less so. Because, while most observers believed that the tightening process was complete, since the 25 basis point increase carried out last July, they now see a new turn of the screw looming before the end of the year.
Disappointment also for 2024
Indeed, the publication of the Fed’s Summary of Economic Projections (SEP) last week suggests an upcoming increase of 25 basis points. According to the “dot plots” (table of expectations on the evolution of rates) presented in this document, such a measure is expected by the vast majority of members of the board of governors of the Fed and the presidents of regional Feds (12 out of
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