Fed: Staying the Course Until the Job is Done

Thursday 15 December 2022

Investment Talks

   

Fed: Staying the Course Until the Job is Done

December 2022 | The most striking takeaway from the Federal Open Market Committee is the near uniformity among FOMC members that the terminal level for rates will exceed 5%. It appears the lower-than-expected October and November Consumer Price Inflation data was not enough to change members' views. Debt ceiling considerations are likely to make the cash balance that the US Treasury holds at the Fed very volatile, leading to reserve volatility. If it leads to money market disruptions, it would be a sign that the supply of reserves in the system is approaching scarcity and could halt the balance sheet run-off.

01 |  The Fed believes in a soft landing and sees the terminal level for rates at slightly above 5%.

02 | The reduction in the size of the Fed balance sheet should continue, with shrinking expected to be around $1 trillion in 2023.

03 | We remain cautious and anticipate market volatility since the Fed's task of bringing inflation down to 2% is a long way off.

Fed: Staying the Course Until the Job is Done

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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 December 15, 2022. 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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