Jump to content

Preview: FOMC meeting - why wait?


Recommended Posts

With the Federal Reserve Funds rate at its highest since 2007, a 'hawkish pause' is widely anticipated this week. Yet, several key developments suggest the market may be underpricing the risk of a June hike.

 

original-size.webpSource: Bloomberg

 

 Tony Sycamore | Market Analyst, Australia | Publication date: Tuesday 13 June 2023 

In its last meeting in May, the FOMC raised the Fed Funds rate by 25bps to a range of 5-5.25% - its highest level since September 2007. While a tightening bias was retained, the Committee noted readiness to adjust the monetary policy if necessary.

The minutes from the meeting confirmed the door was open for a pause, highlighting that members were divided about whether additional rate hikes would be necessary. As stated, “Several participants noted that if the economy evolved along the lines of their current outlooks, then further policy firming after this meeting may not be necessary.”

Federal funds effective rate chart

 

original-size.webpSource: Board of Governors of the Federal Reserve System (US)

What can we expect this Thursday?

On Thursday, the Fed is widely expected to deliver a hawkish pause before another 25bp rate hike in July. This is based on comments from six of the eleven FOMC voters who have spoken in favour of pause, including the key leadership duo of Fed Chair Powell and Vice Chair Jefferson.

Target rate probabilities for the 14 June 2023 meeting

 

original-size.webpSource: CME Group

The median dot is expected to show one additional hike to a peak of 5.25%-5.50%.

 

original-size.webpSource: CME Group

Why wait?

Since the May meeting, several notable developments have occurred, which beg the question, why wait?

  1. The debt ceiling was raised before the X-date avoiding costly disruptions
  2. The impact of the banking crisis has been less meaningful than feared
  3. Core PCE increased by 4.4% YoY from 4.2% previously
  4. Non-farm payrolls increased by a robust 339k in May
  5. Two early pausers, the RBA and the BoC, hiked rates last week
  6. Financial Conditions continue to ease.

As such, we think the market is under-pricing the risk of a hike in June and then a pause in July. More so given the possibility of a hotter-than-expected inflation print this evening.

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • image.png

  • Posts

    • Recently, U.S. Senator Bill Hagerty from Tennessee spoke at the Bitcoin conference, stating his efforts to push for Bitcoin-supportive legislation to promote freedom and opportunity. This year, cryptocurrency has become a key battleground in the election campaigns. It remains to be seen whether future policies on cryptocurrency will improve.
    • The digital landscape is undergoing a profound transformation as attention, once a freely given commodity, is increasingly recognized as a valuable asset. Layer3 is at the forefront of this revolution, pioneering a new economy where attention can be owned, traded, and monetized   This innovative approach empowers individuals to monetize their engagement, providing unprecedented control over personal data. Simultaneously, advertisers benefit from transparent metrics that optimize campaign performance. Content creators are presented with diverse revenue avenues beyond traditional advertising, while the overall ecosystem experiences a more equitable distribution of value.   The implications of Layer3 extend across various sectors. Social media platforms, for instance, can leverage this technology to revolutionize user engagement and monetization strategies. Tokenomics play a crucial role in driving Layer3's economy, incentivizing participation and rewarding value creation. While challenges such as data privacy and market volatility exist, the potential benefits of Layer3 are immense   Anticipation is building as its native token $L3 is on Bitget Pre-market as users await its listing on the exchange. This milestone is expected to significantly increase the token's visibility and accessibility, potentially driving substantial growth and attracting new investors. As the countdown begins, the crypto community watches with keen interest, eager to see how Layer3 will perform in this new chapter.
    • I've been exploring the world of play-to-earn gaming recently, looking for something that's not just about endless grinding but actually offers a fun and rewarding experience. OGC really stood out to me because it combines gaming with a sense of community in a unique way. OGC isn't just a game; it's a platform where you can play, earn, and even help shape its future. You're not just a player; you're part of a community with a voice. The idea of earning crypto while playing games is exciting, but what makes OGC special is its focus on community involvement. Your feedback can directly influence the development of the game, which is a big deal. I've also heard that the OGC token is available for pre-market trading on Bitget. While I'm still getting to know the platform and its features, it's definitely something to keep an eye on. Has anyone else tried OGC? What has your experience been like? I'd love to hear your thoughts and any tips you might have.
×
×
  • Create New...
us