The Fed is not done raising rates, depending on who you ask
Fed Chair Jay Powell was clear on Wednesday — the Fed’s next move has not been decided.
Following the central bank’s latest rate hike and Powell’s press conference, Wall Street economists were fairly evenly divided among those who think we’re at the peak for interest rates and those who believe another rate hike will be needed.
Michael Gapen and the team at Bank of America, for instance, see the Fed going again in September and raising the fed funds rate another 0.25%.
“While it is good news that the disinflation process has continued alongside low unemployment, solid labor market demand, and stronger-than-expected growth outcomes so far this year, these conditions are likely to keep the Fed worried that its policy stance is insufficiently restrictive,” the firm wrote. As for rate cuts, BofA sees these coming in 2024.
Paul Ashworth, chief North America economist at Capital Economics, in contrast, was resolute in his view that Wednesday marked the final step for the Powell Fed’s historic rate hiking campaign.
“We suspect that further signs of a significant easing in the monthly core CPI numbers for July and August will ultimately persuade the Fed to hold fire for the remained of this year particularly if, as we expect, employment gains continue to trend lower too,” Ashworth wrote. Ashworth also noted that while Powell was given an opening at a few points during his press conference to suggest September will see another rate hike, the Fed chair “steadfastly refused to bite.”
In some ways, the last 18 months of Fedwatching has been among the most exciting in decades with aggressive rate hikes surprising markets and Fed officials trying to adjust their messaging on the fly as the reality of a longer-lasting inflation bout set in last year.
But seeing Wall Street economists draw completely opposite conclusions from essentially the same data returns us to the core of what Fedwatching is all about — disagreements that are not categorical, but rather by degrees.
Source: finance.yahoo.com