- The Fed keeps rates unchanged but signals that borrowing costs may rise further.
- Broad projections from policymakers see the benchmark rate rising from the current 5.00%-5.25% range to 5.50%-5.75% by year-end.
- Rate cuts are not expected until next year but could come in quick succession with inflation forecast to fall back more rapidly
Susannah Streeter, head of money and markets, Hargreaves Lansdown:
‘’The Fed has paused for breath but signalled the inflationary fight is still not over and more punishing rate hikes could be on the way. Investors had expected policymakers to keep rates on hold, but the more hawkish tone came as some surprise, with two extra hikes pencilled in by half of the officials sitting on the committee. There are three outlier views suggesting an even tougher stance might be needed to take down inflation closer to target. While the Fed insists future decisions will be driven by further data, it seems policymakers are expecting further economic snapshots to show that inflation is remaining stubborn. The new dot plot sparked a sell off on stocks on Wall Street with recent high enthusiasm ebbing away as investors assess plenty of hurdles ahead before the chance of rate cuts finally appears on the horizon in 2024. The sterner take on the situation facing the Fed is likely to increase bets that the Bank of England will increase rates not just next week, but multiple more times before the end of the year. Inflation is still the ogre looming over investor sentiment and that’s unlikely to change until the rate of price increases retreats much more quickly.’’
