Fed Delivers a Dovish Hike: A Rate Cycle Peak May be Close

Thursday 23 March 2023

Investment Talks


Fed Delivers a Dovish Hike: A Rate Cycle Peak May be Close

March 2023 | Fed Chair Jerome Powell's comments confirmed the Fed is very likely close to the peak in its rate cycle, but he clearly did not endorse the rate cuts currently priced into the market. He struck a balanced tone between maintaining financial stability and stressing the Fed's ongoing fight against inflation. He noted that while the Fed did consider a policy pause, recent stability in financial conditions appeared to have tipped the scales in favor of a hike, and he reiterated that the Fed has the tools to address financial stability risks. Overall, he worked hard to alleviate concerns about the safety of deposits, stating the banking system is safe, and well capitalized.

01 |  On March 22, the US Federal Reserve hiked the fed funds rate by 25bp to 4.75-5.00%, a level not seen since 2007.

02 | The Fed said it believes that further future tightening will come less from interest rates, and more from tighter credit conditions as the banking system naturally recalibrates after recent challenges to depositor and investor confidence.

03 | We remain cautious and anticipate market volatility since the Fed continues to be data dependent, and are skeptical that the Fed will cut rates as early as June 2023, as expected by implied overnight rates. 

Fed Delivers a Dovish Hike: A Rate Cycle Peak May be Close

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Unless otherwise stated, all information contained in this document is from Amundi Asset Management US (Amundi US) and is as of March 23, 2023. Diversification does not guarantee a profit or protect against a loss. The views expressed regarding market and economic trends are those of the author and not necessarily Amundi US and are subject to change at any time based on market and other conditions, and there can be no assurance that countries, markets or sectors will perform as expected. These views should not be relied upon as investment advice, a security recommendation, or as an indication of trading for any Amundi product. This material does not constitute an offer or solicitation to buy or sell any security, fund units or services. Investment involves risks, including market, political, liquidity and currency risks. Past performance is not a guarantee or indicative of future results. Amundi Asset Management US is the US business of the Amundi Asset Management group of companies.

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