Fed Preview: Forecasts from 15 major banks, a pause, but the end of rate hikes?

We expect the FOMC will keep rates steady and maintain its tightening bias. There is evidence that both inflation and labour market pressures are easing, but considerable further progress is needed. We expect the FOMC will revise up its 2023 and 2024 GDP forecasts. This could imply a slower speed of normalisation in the Fed’s dual mandate, requiring rates to stay higher for longer. Watch the dot plot.  We continue to see Fed policy as highly data-dependent and patient, with most officials open to further rate rises if appropriate. Our view is the Fed is done with its tightening cycle, but risks remain that further rises may be needed.

We expect the Fed to maintain rates unchanged. Markets will focus on how FOMC participants assess the need for later hikes. In June, 12 out of 18 ‘dots’ looked for one more hike, but we doubt it will materialize. Markets have bought into the ‘higher for longer’ narrative, and the consequent tightening in financial conditions limits the need for further hikes.

The Fed will probably stay put and leave the federal funds target range at 5.25%-5.50%. This is because inflation and the labor market are moving in the right direction from the Fed's perspective, which is why further rate hikes are unnecessary. Rather, rate cuts are likely to be on the agenda in the not too distant future.

We expect the Fed to not hike at this meeting, but to keep a strong hiking bias and to deliver one last hike later this fall as inflation will continue to surprise to the upside.

We expect the FOMC to remain on hold in September because of the gradual decline in core inflation and the improving balance in the labor market. The FOMC is likely to stay data-dependent but stress its willingness – underlined by the new dot plot – to deliver another 25 bps hike before the end of the year if warranted by the incoming data. However, we still expect the economic data to deteriorate before the November meeting and avert additional rate hikes. Nevertheless, the risk to our baseline is to the upside. As long as the economy stays strong, and labor markets tight, additional hikes are likely. 

While we expect to see the Fed leave interest rates on hold, the door will be left open for a potential future hike.

The FOMC is widely expected to pause rate increases for the second time over the last three meetings, keeping rates unchanged at 5.25%-5.50%. We expect the Committee to continue shifting to a message of ‘higher for longer’, though Powell's press conference and dot plot revisions might have a hawkish flavor to them as Fed officials aren't likely to fully close the door to additional rate increases.

The Fed is widely expected to hold the Fed Funds Rate at the 5.25-5.5% range. The Fed remains firmly focused on the data and won’t hesitate to lift the interest rate again if necessary (particularly if inflation shows signs of reaccelerating). But not this week.

The FOMC is expected to leave the target for the fed funds range unchanged at 5.25-5.50%, with markets pricing effectively no chance of a hike. Offering more intrigue than the decision itself is the guidance that will be offered by policymakers for the rest of the year and beyond. Importantly, a new Summary of Economic Projections and ‘dot plot’ will be published.

No change expected. We do not expect additional rate hikes this year and expect the first cut to come in spring 2024. At their September meeting, we expect the Fed to express the potential to raise rates further due to inflation, but we do not expect them to exercise this option. 

We do not expect a material change in the statement language and expect the key sentence that reads ‘in determining the extent of additional policy firming that may be appropriate…’ to remain unchanged. We expect substantial upward revisions to US GDP projections for 2023 and potentially modest downward revisions to the unemployment rate forecast. On the other hand, core PCE forecasts will likely be lowered by a couple of tenths. This combination of revisions would be relatively neutral, and Fed officials will likely preserve optionality by keeping the 2023 median dot unchanged at 5.6%. We also expect the 2024 dot to stay unchanged at 4.6%. Chair Powell will likely strike a neutral tone during the press conference, highlighting continued data dependence in determining the need to tighten further or hold the policy rate constant in upcoming meetings.

We look for the FOMC to leave the fed funds rate unchanged at 5.25-5.50%  as inflation has more clearly started to slow. However, with price growth still running well above target, we expect the hold to be delivered with the message that further policy tightening is possible if incoming data warrants it.

The Fed seems highly likely to leave rates unchanged and signal data dependance ahead, which might not move markets materially.

We expect a hawkish hold. Recent data have been mixed enough for the Fed to feel comfortable with another skip and WIRP suggests only 5% odds of a hike this week.  Most likely, we will see the next hike on November 1. By that November meeting, we will get one more each of the jobs report, CPI, PPI, and Retail Sales as well as two PCE readings. If things go the way we expect for the US, the current 30% odds of a hike are way too low.

We expect the Fed to keep rates on hold. The September FOMC meeting also brings the quarterly update to the Committee’s projections. This is likely to show upgrades to GDP growth and headline PCE inflation (due to higher Oil prices), but core PCE inflation projections are likely to be broadly unchanged. We also expect minimal changes to the Committee’s outlook for interest rates or the ‘dot plot.’ It is possible that rate cut expectations are reduced somewhat, but we do not expect any changes here to be market-moving. This leaves the focus for markets on Chair Powell’s press conference performance. We expect Powell to express optimism over the continued cooling in the labour market and the accompanying disinflation, which has come alongside continued strength in economic growth. At the same time, we expect Powell to reiterate that the Committee remains open to further rate rises should that prove necessary. He may also point to the recent rise in Oil prices as a risk to the inflation outlook, should this push inflation expectations higher (not our base case). We continue to think the Fed is done raising interest rates, and that a further softening in the labour market combined with declining core inflation will trigger rate cuts starting from March next year.