Fed Unfiltered, Weekly Report: 10/31/22
Page(s): 1
FOMC – This Week a Rate Hike and Talk about Lags and Pauses
- A 75bps rate hike is expected at this week’s FOMC meeting.
- Based on the September SEP and Fed commentary, another 50bps hike in December is likely, although expect a less unified Fed and a Dove/Hawk discussion centered around the level of upcoming hikes (50bps or 25bps) and the pace of the final few hikes (continuing to front load or to pause).
- Currently, the endpoint for this rate hike cycle is either 4.75% (Sept SEP has Fed Funds peaking at 4.6% in 2023) or at 5.00% (Mary Daly interview on 10/21/22).
- Although, rate hikes have an immediate effect on investment & borrowing rates, it can take up to 2-years for rate hikes to impact inflation (Atlanta Fed, report 8/31/22), which would be sometime in Dec 2023.
- In speeches and interviews, we’ll likely see Fed commentary continue to clarify the terminal rate and talk more about monetary policy lags and pausing rate hikes (see some pre-blackout comments below).