2023-09-21 09:50:00
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Investing.com – Expectations for the coming period witnessed noticeable changes immediately following the US Federal Reserve’s interest rate decision was issued.
Investors raised the possibility of a rate stabilization by the Federal Reserve at the next November meeting in the wake of yesterday’s interest rate decision, according to .
At the same time, there were some changes in Fed Swaps regarding interest rates, as this tool indicates interest expectations for the upcoming Federal Reserve meetings, as the pricing shifted following the decision was issued to mean that the interest rate cut will be next year in September instead of May.
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Federal decision
Yesterday, the US Federal Reserve kept interest rates unchanged at 5.25% – 5.50%, but it hardened its stance on monetary tightening, as it is expected to raise interest rates once more by the end of the year and tighten monetary policy until 2024 more than previously expected.
As they did in June, central bank policymakers on average expect the benchmark overnight interest rate to peak this year in a range of 5.50-5.75%, a quarter of a percentage point above the current range.
But the central bank’s updated quarterly forecasts indicate that interest rates will fall by only half a percentage point in 2024, compared to expectations of a full percentage point decline during the central bank’s meeting in June.
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They also raised expectations for next year’s interest rates by half a percentage point, indicating that the Fed expects interest rates to remain much higher for longer in order to bring inflation down to target.
US Federal Reserve Chairman Jerome Powell said on Wednesday that monetary policy officials are “ready to raise interest rates further if appropriate,” and that they will continue to hold “meeting following meeting” on interest rates depending on incoming economic data.
Powell said that high interest rates are putting pressure on business investment, while the labor market remains tight.
He expected inflation to exceed the target rate, adding: “We are strongly committed to returning inflation to 2%… and are ready to raise interest once more if that is favorable.”
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Interest pricing now
Expectations appear to have changed to 66.5% in favor of stabilizing interest rates at current levels. This was following it was only 59.2%. Which indicates that the markets have become more certain that the Fed will hold interest rates at the current range of 5.25% – 5.50% also at the next meeting.
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