What the Fed will do according to analysts
The next steps of the Fed seen and forecast by analysts
What will the Fed decide?
The consensus of the analysts foresees a hike of 50 basis points in the reference rates, but it is not excluded that the American central bank chooses to proceed with a more aggressive move, namely a 75 basis point increase. This will be known only tomorrow evening at 20 (Italian time), when the Federal Reserve will release the press release with the decisions taken by the Federal Open Market Committee (FOMC) in the two days of monetary policy meetings. Following, as usual, there will be the press conference of President Jerome Powell, from which details on the choices of the central bankers and expectations for the decisions of the next meetings will emerge.
NEXT STEPS OF THE FED
The inflation figures released last Friday by the Bureau of Labor Statistics (BLS) have increased the pressure on the Fed. Consumer prices recorded an increase of 1% on a monthly basis, against the + 0.7% of the consensus, and of 8.6% on an annual basis, higher than the + 8.3% expected by the market. highest since December 1981.
WHAT THE FED WILL DECIDE
Federal Reserve officials have made no comment since the beginning of their pre-meeting "blackout" period on June 4, and prior to that they had said they were in favor of a second half-point hike in rates at the 14-day meeting. June 15. However, that outlook was conditioned, as Powell said in his May press conference: “Economic and financial conditions are evolving broadly in line with expectations. The expectations are that we will start to see inflation flatten out ”. This was not the case, however, because the much hoped-for "peak" of inflation did not materialize.
THE COMMENT OF FRANKLIN TEMPLETON
"The Fed has to tighten firmly both because the equilibrium interest rate is most likely higher than you think," said Sonal Desai, Fixed Income Chief Investment Officer at Franklin Templeton, adding that the US central bank must " restore its credibility by pushing monetary policy towards a truly restrictive framework. Otherwise, inflation will remain high and inflation expectations will rise further, so that the only way to ensure price stability would be to provoke a deep recession ”.
THE PIMCO FORECAST
“Our basic prediction,” comments Allison Boxer, US Economist at PIMCO, “is that the Fed hikes rates by 50bps this week and tries to set the stage for the possibility of a 75bp hike in July; but, if the market prices risk greater than 75bps in the next few days, we think this will give the Fed an opportunity to be more aggressive on Wednesday. We expect President Powell to use the press conference to hint that bigger hikes are back on the table and won't slow down in September. Going forward, stickier inflation is translating into even more aggressive Fed policy front loading which creates a serious risk of over tightening and ultimately a greater downside risk to our growth outlook which is already there. stalled ".
THE ANALYSIS OF GENERALI INVESTMENTS
"The Fed is ready to define another significant rate hike – according to Paolo Zanghieri, Senior Economist of Generali Investments – The very negative data on prices released on Friday increase the probability of a 75 basis point increase, unprecedented in the last 40 years. , rather than the widely expected 50 basis points, as inflation is likely to remain stubbornly high over the next few months and rapid price increases are not limited to energy but are widespread. Another 50 or 75 bp hike is almost certain for July as well. Still, the Fed's determination to act quickly and decisively on rates will have to take into account the fact that cracks are starting to appear in the most rate-sensitive sectors of the economy, such as construction. manufacturing, indicate a substantial deceleration in activity in the wake of uncertainty, rising input prices and weakening global demand. This puts the Fed on an even more difficult trade-off between fighting inflation and avoiding pushing the economy into recession. We believe this will lead to a slower pace of tightening starting in September, when we expect a 25bp rate hike, and for the rest of the year. ”
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/cosa-fara-fed-analisti-previsioni/ on Tue, 14 Jun 2022 13:01:52 +0000.