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- Fed Preview: Three scenarios and their implications for BDXY – TDS
Fed Preview: Three scenarios and their implications for BDXY – TDS
Economists at TD Securities discuss the Federal Reserve Interest Rate Decision and its implications for the Bloomberg Dollar Spot Index.
Hawkish (20%)
Fed delivers a pause but maintains its hawkish bias as the majority of Fed officials still judge another rate increase as the most likely policy option. Inflation is projected to remain sticky in 2024, which allows the Committee to maintain its ‘higher for longer’ message. The median dot stays unchanged at 5.125%. BDXY +0.30%.
Base Case (70%)
Fed decides to keep rates on hold for a third consecutive meeting, but the Committee waters down the bias for additional tightening as the majority of Fed officials are no longer supporting additional tightening. The dot plot for 2024 shows three rate cuts, with the median dot dropping to 4.625% from 5.125% in September. BDXY -0.25%.
More Dovish (10%)
Fed pauses but signals less impetus to stay ‘higher for longer’ as their inflation projections reflect a more optimistic outlook for 2024. A more benign inflation path opens the door to additional policy accommodation, with the dot plot median signaling four rate cuts for next year. The new median dot drops to 4.375% for 2024. BDXY -0.45%.
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