01 November 2023
If you are covering the Federal Reserve’s decision to hold interest rates, please find below a comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“Today's decision by the Fed to maintain interest rates underscores the complexities of the current U.S. economic landscape. Despite the economy defying expectations with robust job growth and economic expansion, the inflation rate remains well above their 2% target. Analysts will be keenly observing each subsequent data release, sifting for indications of the Fed's future direction.
“The market dynamics, particularly the rise in long-term U.S. Treasury bond yields and the near 8% rate on 30-year fixed-rate mortgages, not seen in nearly a quarter of a century, shed light on the inherent challenges of the economy. Furthermore, with consumer giants like McDonald's and Amazon surpassing earnings expectations and a potential of around $1 trillion of pandemic-era savings still available to drive consumption, the inflationary pressure remains palpable.
“It's a delicate task to ensure that the economy, while strong, doesn't overshoot, but also avoids a sharp contraction. The Federal Reserve's next moves to recalibrate inflation back to its target will likely serve as a benchmark for other central institutions, such as the Bank of England and the European Central Bank. It is also worth bearing in mind that while another pause may look like the end of the hiking cycle, the strong economic data may compel the Fed to hit the hike button once more.
“While the rates stand unchanged for the moment, the journey is far from its conclusion.”
