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Fed hikes by 75 basis points in November
At its meeting on 1–2 November, the Federal Open Market Committee (FOMC) decided to raise the target range for the federal funds rate by 75 basis points to 3.75–4.00%—the fourth successive 75 basis-point hike.
The decision to hike was aimed at containing inflation, which has been running well over the Central Bank’s 2.0% target in recent months due to external price pressures and the tight domestic labor market.
Looking forward, the Fed reiterated that “ongoing increases in the target range will be appropriate”. While the lower-than-expected October inflation data led to market hopes that the Fed’s tightening cycle could soon peak, our panelists continue to see notable rate hikes ahead, with the upper bound of the federal funds target rate expected to peak close to 5% in the middle of next year. That said, there is a notable discrepancy in panelists’ views.
Giving their take on the outlook, the EIU said:
“The latest CPI data fit with our view that the Fed will slow the pace of rate rises in the coming months, bringing its policy rate to a peak target range of 4.5-4.75% in February 2023, from 3.75-4% currently.”
Analysts at Nomura are more hawkish:
“Despite the sharp deceleration in core CPI inflation, we think that policymakers will likely discount some of the weakness […] Altogether, we maintain our above-consensus terminal rate forecast of 5.50-5.75%, which we expect in May 2023.”
The next FOMC meeting is scheduled for 13–14 December.
United States - Money Data
|Money (annual variation in %)||5.8||6.8||5.7||3.9||5.1|
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|Bond Yield||1.92||-0.43 %||Dec 31|
|Exchange Rate||1.12||0.65 %||Dec 31|
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November 16, 2022
Retail sales increased 1.3% month-on-month in seasonally-adjusted terms in October (September: 0.0% mom).
November 10, 2022
Inflation came in at 7.7% in October, down from September’s 8.2%.
November 4, 2022
Total non-farm payrolls increased by 261,000 in October, down from 315,000 in September but beating market expectations.
November 2, 2022
At its meeting on 1–2 November, the Federal Open Market Committee (FOMC) decided to raise the target range for the federal funds rate by 75 basis points to 3.75–4.00%—the fourth successive 75 basis-point hike. The decision to hike was aimed at containing inflation, which has been running well over the Central Bank’s 2.0% target in recent months due to external price pressures and the tight domestic labor market.
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GDP rebounded in Q3, expanding 2.6% in seasonally adjusted annualized rate terms (SAAR), contrasting the 0.6% contraction recorded in the second quarter and coming in slightly above market expectations. Household spending increased 1.4% in the third quarter, which was below the second quarter's 2.0% expansion, with consumption likely weighed on somewhat by elevated inflation.