Interest rate changes

The Fed’s biggest interest rate call in years happens Wednesday. Here’s what to expect

This week’s gathering of the central bank’s Federal Open Market Committee carries an uncommon air of mystery.

Will it be the traditional quarter-percentage-point, or 25-basis-point, rate reduction, or will the Fed take an aggressive first step and go 50 basis points, or half a point? Fed watchers are unsure.

Beyond the quarter vs. half debate, this will be an action-packed Fed meeting, with updates on projections for rates cuts in the future as well as adjustments to economic estimates.
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The Fed'''s biggest interest rate call in years happens Wednesday. Here'''s what to expect
 
Expect Fed To Maintain 'Higher For Longer' With Steeper Dots Curve

Another central-bank bonanza is upon us, and the parlor game of scrutinizing policymakers’ every utterance or non-utterance can get going again in earnest. The Fed has added a whole new dimension to the game with the SEP, allowing every FOMC member to make anonymous forecasts for where fed funds, growth, inflation and the unemployment rate will be in the coming years.

The market has been gunning for increasingly larger rate cuts next year, with 110 bps now priced. That’s getting into “hard-landing” territory, and there’s not enough evidence today to support that notion with such a high degree of certainty - definitely not to the point that the Fed will want to squander its tightening work up until now.

When the market increases the amount of cuts it is expecting (the Fed “pivot”), that has tended to elicit a steepening of the dots curve by the FOMC.
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Expect Fed To Maintain '''Higher For Longer''' With Steeper Dots Curve | ZeroHedge

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CNBC Fed survey finds - Fed to start cutting rates midyear in 2024 with high chance of soft landing

Fed to begin cutting rates in June, according to a majority of the respondents to the CNBC Fed Survey.

Respondents see the probability of a soft landing at 47%, up 5 points from the October survey. They lowered the probability of a recession in the next year by 8 points to 41%.

The 35 respondents to the survey include economists, strategists and analysts. The Fed decides on rates and gives its economic outlook Wednesday.
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Fed to start cutting rates midyear in 2024 with high chance of soft landing, CNBC Fed survey finds
 
Fed holds rates steady, upgrades assessment of economic growth

In a widely expected move, the Fed’s rate-setting group unanimously agreed to hold the key federal funds rate in a target range between 5.25%-5.5%, where it has been since July. This was the second consecutive meeting that the Federal Open Market Committee chose to hold, following a string of 11 rate hikes, including four in 2023.
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https://www.cnbc.com/2023/11/01/fed-meeting-november-2023-.html
 
Markets are on board with the Fed’s ‘higher for longer’ policy, CNBC survey shows

Respondents to the CNBC Fed Survey expect no additional rate hikes from the Federal Reserve and have fully embraced its “higher-for-longer” mantra.

They believe the Fed is now on hold into September of next year, when 57% expect a rate cut.

The survey also showed a 49% expectation of a recession in the next 12 months and a 42% chance of a soft landing.
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https://www.cnbc.com/2023/10/31/mar...gher-for-longer-policy-cnbc-survey-shows.html


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The FOMC acted as expected but cautiously spoke about their future plans. Investors were looking for validation that the rate hike campaign has ended and even clues to a rate cut in the second half of the year. Instead, the Fed obviously left themselves room to raise rates again if needed without blindsiding the market. The key statement in the policy statement was, “determining the extent to which additional policy firming may be appropriate”.

Chairman Jerome Powell kept the conservative language up in the following press conference. He spoke of an "ongoing assessment" of whether the current rate is sufficient. He spoke of the balancing act the Fed must be prepared for as the economy oscillates in the current environment with the main goal of reducing inflation to 2-3% while avoiding a major recession along the way.

Powell himself thinks it's more likely their inflation goals will be reached without a recession, and if the U.S. does fall into a recession, it would be mild. This is not supported by the past and is more a hopeful outcome if all goes well for the chairman.

In all the market was disappointed by this FOMC meeting. The S&P 500 was up around 0.3% before the policy statement and press conference then ended the day with a 0.7% loss.
 
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BlackRock warns that investors are making a mistake by betting on the Fed to cut rates

Market pricing as of Tuesday morning pointed to the Fed holding its benchmark interest rate at current levels and then starting to reduce as early as July.

The expectation for cuts would be consistent with a recession and an accompanying fall in inflation, assumptions that Wall Street strategists think are dubious.

“We think the Fed could only deliver the rate cuts priced in by markets if a more serious credit crunch took hold and caused an even deeper recession than we expect,” BlackRock strategists wrote.
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https://www.cnbc.com/2023/03/28/bla...stake-by-betting-on-the-fed-to-cut-rates.html
 
Goodbye negative negative yields.. for now.

As central banks around the world attempt tighten up inflation rates, so goes some of the last negative yielding bonds in the world. Japan’s economy ownes the last of the sub-zero-yielding debt.

It wasn’t long ago negative yielding debt was common in the global economy, particularly in Japan and European economies. The stimulus that kept economies alive through the worst of the pandemic is all being tightened back up to slow the whiplash of inflation.

But it’s not a final goodbye if the last sun-zero-yields in Japan disappear. The global economy is in perpetual oscillation, the pandemic was just an extra push to the pendulum.



https://www.wsj.com/articles/negati...=j93sxlsgukb54ss&reflink=share_mobilewebshare
 
Here’s everything the Federal Reserve is expected to do Wednesday

Wednesday’s meeting of the rate-setting Federal Open Market Committee will bring an assortment of moves to chew on.

In addition to an expected half-point interest rate increase, investors will be watching how the central bank communicates its future intentions.

“There is no need at this point to continue hiking rates but, of course, they will,” RBC Capital Markets economist Tom Porcelli said.
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https://www.cnbc.com/2022/12/14/her...eral-reserve-is-expected-to-do-wednesday.html
 
Fed Hints At 'Slowdown' After Most Aggressive Tightening In Over 40 Years

[FONT=&quot]Market participants are describing this as a [/FONT]'soft pivot'[FONT=&quot] but we note that while[/FONT] terminal rate expectations have dropped (dovishly) but rate-cut expectations have also dropped (hawkishly) - market is pricing higher rates for longer.
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https://www.zerohedge.com/markets/fomc-4
 
Fed approves 0.75-point hike to take rates to highest since 2008 and hints at change in policy ahead

The Federal Reserve on Wednesday approved a fourth consecutive three-quarter point interest rate increase and signaled a potential change in how it will approach monetary policy to bring down inflation.

In a well-telegraphed move that markets had been expecting for weeks, the central bank raised its short-term borrowing rate by 0.75 percentage point to a target range of 3.75%-4%, the highest level since January 2008.
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https://www.cnbc.com/2022/11/02/fed...-to-the-highest-level-since-january-2008.html
 
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