Anticipation of Final Federal Rate Hike
All eyes are on the U.S. central bank as it stands on the threshold of a potential 25bps boost to the pivotal bank rate. Here are the key points to note:
- CME Group’s Fedwatch tool predicts a 99.2% probability of a 25bps escalation
- Only a 0.8% chance for the rate to remain static
- A Reuters survey suggests this could be the last rate increase
- Jan Nevruzi from Natwest Markets emphasizes the need for caution
- Former Fed chair Ben Bernanke shares the same view
According to Bernanke, inflation will continue to drop and the inflation rate is expected to range between 3% to 3.5%. While economic growth might slow down, a deep recession is unlikely in the next year. The Fed’s “dot-plot” suggests the federal funds rate could reach 5.50%-5.75%, but only 19 out of 106 economists surveyed believe it will reach that high.
Hot Take
The anticipation of the final federal rate hike is high, with strong signals from both market tools and economists. While there is confidence in a 25bps increase, caution is advised as uncertainties still exist. The views of former Fed chair Ben Bernanke align with the majority, suggesting that this could be the last hike. However, with inflation expected to drop and a modest impact on the economy, a deep recession is unlikely in the near future.
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