SCHQ - Federal Reserve To Downplay Chances Of Imminent Action While Holding Rates Steady

2024-01-26 20:55:00 ET

Summary

• The dovish shift in Fed forecasts in December – with three rate cuts pencilled in for 2024 – incentivised the market to push even more aggressively in pricing cuts.
• However, they appear to have gone too far too fast for the Fed’s liking, even though inflation is almost back to target.
• We expect the Federal Reserve to stay on hold on 31 January and to push back on rate cuts in March.

By James Knightley | Padhraic Garvey , CFA | Chris Turner .

Expect more pushback against a March rate cut

The Federal Reserve is widely expected to keep the Fed funds target range unchanged at 5.25-5.50% next Wednesday while continuing the process of shrinking its balance sheet via quantitative tightening – allowing $60bn of maturing Treasuries and $35bn of agency mortgage backed securities to run off its balance sheet each month....

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