21 September 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:
“With today’s pause, we are now in the waiting game with the Fed to see if their action to date is enough to achieve the coveted ‘soft landing’ in the US. Each and every data point released from now on will be scrutinised and pored over with a fine toothcomb to get any indication of if the Fed will raise rates again, or when in fact it is time to start cutting rates.
“Ultimately, given the continued strength of the economy and the labour market, we will likely be waiting quite a while before rates are cut. However, having originally been late to raising rates in the face of spiralling inflation, Jerome Powell won’t want to make the same mistake on the way back down and inadvertently overcorrect by doing nothing.
“What we are likely to see is the Federal Reserve continue to be at the front of the race in bringing inflation back to target, and it is likely that its moves will be mimicked by the Bank of England and European Central Bank in due course – although they maybe have one or two hikes still to go. While today sees rates held, it is certainly not the end of what has been quite a painful journey for some. Should inflation show any signs of returning in a meaningful way though, then interest rates will be back on the table. Indeed, some on the Fed committee are pointing to one more rate rise this year, but ultimately they will be led by the data.”
