Fed counts on tighter finance to calm inflation

In breve

Chair Powell struck a rather dovish tone at yesterday’s meeting, over and above the widely anticipated and unanimous decision not to move rates. The Press release contained few changes (see below). The view on the current economic situation was up-graded and, more importantly, the FOMC recognised the role tighter financial condition are having in moderating inflation.

Highlights:

  • At yesterday’s meeting, the Fed left the door open to a further raise in December or Q1, but the overall tone of the statement and press conference strengthened the conviction that the bank is done hiking. The press release and the Q&A underlined the role of tighter financial conditions in taming demand. Paradoxically the drop in bond yield following the meeting, if protracted, could lead to looser financial conditions and another rate rise.
  • The FOMC has also become more concerned about the risk of overtightening, despite the very strong Q3 GDP figures and solid employment growth. The much weaker than anticipated manufacturing ISM is a reminder that higher rates and a complicated global outlook are set to weigh on the economy.
  • We continue to predict a marked growth slowdown into 2024. We still see June as the likely beginning of rate cuts, but resilient activity and sticky inflation may force the Fed to maintain the policy rate at the current level into H2.    
     

Download the full publication below

Fed counts on tighter finance to calm inflation
Picture

© Generali Investments, tutti i diritti riservati. Questo sito web è fornito da Generali Investments ed è considerato come una comunicazione di marketing e una promozione finanziaria riferita ai prodotti e servizi delle società elencate di seguito, appartenenti al Gruppo Generali: Generali Asset Management S.p.A. Società di gestione del risparmio & Generali Investments Luxembourg S.A. (nel prosieguo, congiuntamente indicate come Generali Investments). Inoltre, il sito può contenere comunicazioni di marketing e promozioni finanziarie di prodotti e servizi di società appartenenti alla piattaforma coordinata da Generali Asset Management S.p.A. Società di gestione del risparmio, nello specifico di Infranity, Sycomore Asset Management, Aperture Investors LLC., Plenisfer Investments SGR, Lumyna Investments, Sosteneo Infrastructure Partners SGR e Generali Real Estate S.p.A. Società di Gestione del Risparmio