2023-06-18 10:00:00
As had been communicated by several important members of the Board upstream, the Fed kept its range of key rates unchanged at 5/5.25%: this marks a small event since it is the first status quo of the Fed in 15 months. The press release remained virtually unchanged. But the surprise came from the fact that the members of the FOMC raised their key rate projections (the famous dots) by 50 basis points (0.5 percentage points) for the end of the year: in other words, they say expect two more 25 basis point rate hikes this year.
Virtually all of Jerome Powell’s press conference revolved around the apparent contradiction between deciding the status quo for this meeting and signaling further rate hikes this year: if FOMC members were really convinced of the need to tighten interest rate policy, why wait? Some confusion arose. Indeed, the Fed indicated that nothing had already been decided for the July meeting but that anything could happen. He stressed the importance of economic and financial developments in the coming weeks.
The changes in key rate projections are astonishing. We could possibly have understood an additional rate hike signaled in the dots as a way of leaving an open door (indeed, not changing the dots would have signaled a definitive break in the rate hike cycle) (…)
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