Slowdown in Fed rate hikes
Wednesday 08 February 2023
February 2023 | 2 minute read
The Federal Open Market Committee (FOMC) of the Fed met on 31 January and 1 February and decided to increase the Fed funds rate by 25 basis points to the range between 4.50-4.75%. This raise has not changed our expectation of the Fed’s terminal rate at 5.25%.
The committee decided to slow the pace of further rises to 25 basis points, as further hikes will be now a matter of fine-tuning.
The US central bank could be approaching to the end of its hiking cycle, and market participants are starting to wonder when the rates will be cut and inflation will transition back to 2%.
Jerome Powell, the Chair of the US Federal Reserve, reiterated that some more time is still needed and it would be hard to bring back inflation to manageable levels without a painful economic downturn.
However, Mr Powell also added that US growth should remain subdued but positive, due to the improvement of global growth prospects and he was not particularly concerned about the easing of financial conditions.
The FOMC will update its forecasts in March, but Mr Powell doesn’t expect any rate cut this year, however adding that “if we do see inflation coming down much more quickly, that will play into our policy setting, of course”.
Source: Amundi Institute, FOMC Meeting: Five takeaways, 3 February 2023
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Date of first use: 8 February 2023
Doc ID# 2720157