The consensus is for the Fed to deliver its first rate hike since July 2023. Not only that, but some forecasters see another coming before the year is out.
“We expect the Fed to deliver a 25bp rate hike at the September FOMC meeting,” Deutsche Bank chief US economist Matthew Luzzetti wrote. “While forward guidance is unlikely, the median dot should show another rate increase this year, with several officials projecting more than that.”
The consensus is for the Fed to deliver its first rate hike since July 2023. Not only that, but some forecasters see another coming before the year is out.
“We expect the Fed to deliver a 25bp rate hike at the September FOMC meeting,” Deutsche Bank chief US economist Matthew Luzzetti wrote. “While forward guidance is unlikely, the median dot should show another rate increase this year, with several officials projecting more than that.”
Michael Feroli, chief US economist at JPMorgan, expects to see the same. While he maintains that an October rate hike is unlikely, as it takes time to assess the broader economic impact, his team predicts a December rate increase.
“We expect that the Committee will increase the target range for the fed funds rate by 25bp to 3.75-4.0%,” Feroli said. “At the end of the day the Chair’s repeated stern warnings on inflation intolerance risk institutional credibility absent some action to back it up.”
For some Wall Street strategists, the meeting is a key opportunity for Warsh to build credibility before market conditions potentially worsen.
“With markets already pricing close to a 90% probability of a move, hiking now would give Warsh’s tenure at the Fed an opportunity to build credibility and a clearer reaction function before the bond market forces his hand in a more disorderly manner,” stated Morgan Stanley strategist Michael J. Wilson.
Jay Woods, chief market strategist at Freedom Capital Markets, noted that while economic data supports the case for a rate hike, he isn’t certain that Warsh will actually do it.
“So far he has practiced patience, letting the market dictate the path of rates and hesitant to make any move,” Woods stated. “The Fed appears to have the votes. The market has made its call. The data has made a compelling case. Now we find out whether Kevin Warsh agrees.”
