Tomorrow’s FOMC is probably the most important Economic event of 2022. The Federal Reserve will be providing guidance on base points increase to Interest Rates.
With Inflation numbers presented last week not showing the signs of the economy cooling down to a required level for “Soft Landing”, a term conveniently introduced by FED as a substitute for “Transitional Inflation”😌, there is a certain ambivalence between core financial institutions, as to what the Federal Reserve have up it’s sleeve this time.
On one hand, to curb the decrease in hard-earned nominal salaries, the FED has to be decisive, one the other, it’s a thin line between cooling down the inflation and freezing the economy to the state of recession.
With “Quantitative Tightening” also underway on one side, we are yet to see if the second most powerful tool in the Federal Reserve arsenal will come to rescue (many believe it’s too little, too late), should rate hikes to 3.5-4.25% by the end of the year prove futile in curbing the growing prices.
In the meantime below are the key forecasts for tomorrow by the most prominent Financial Institutions out there.
|Wells Fargo||0.75%||A 75bp (or better) September hike is baked into expectations, and we believe this will be the last 75bp hike for some time… in all, we believe we are at peak hawkishness and inflation|
|Morgan Stanley||0.75%||We expect the fomc to raise rates by 75bp at its september meeting and upwardly revise the projected peak rate to 4.1% at end-2023, and we continue to see rate cuts beginning in 2024|
|Goldman Sachs||0.75%||We have raised our FED funds rate forecast by 75bp over the last two weeks, and now expect that the FOMC will hike by 75bp in September, 50bp in November, and 50bp in december to reach our terminal rate forecast of 4-4.25% by the end of 2022|
|Bank of America||0.75%||We expect the fed to raise its policy rate by 75bp in September to 3.0-3.25% and project the target range for the federal funds rate to reach 3.75-4.0% by year-end|
|CITI||0.75%||The fed will likely deliver its third consecutive 75bp rate hike on Wednesday… ultimately, the fed will need to confront whether the 4-4.5% terminal rate now being priced in is restrictive, or just neutral, given underlying inflation currently at 4%+|
|Nomura||1.0%||Materializing upside inflation risks are likely to result in the FED raising rates by 100bp at the September FOMC meeting… we continue to expect a 50bp hike in november, but now anticipate another 50bp hike in december|
Whatever the hikes will bring, it’s best to stay cautiously pessimistic about the S&P500 regardless, in the meantime, in case of the higher than expected increase we can see USD appreciating against major currencies further.
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