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Published on Thursday, November 3, 2022

US | Fed signals once again a higher peak for rates

However, it also laid the ground for a slower pace of hikes as soon as the Dec or Feb meeting; talk about pausing is “very premature.”

Key points

  • Key points:
  • As widely expected by analysts (us among them) and market participants, the Fed delivered the fourth consecutive 75bp hike, taking the fed funds rate to 3.25-4.00%.
  • The main question going forward is related to determining how high will the fed funds rate need to go and not anymore on how fast the Fed should take rates to that level.
  • Powell signaled that a majority of FOMC members are now projecting a (higher) peak target range of 4.75-5.00%, in line with our recently revised baseline scenario.
  • Once the Fed reaches a sufficiently restrictive rate level, uncertainty will revolve around determining for how long to keep a restrictive stance of policy.
  • A downshift in the tightening pace and a pause, will likely be driven by labor market data given that underlying inflation is pointing to short-term stickiness.

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