Skip to content
The Fed says ‘jump’, we say ‘how far?’


The main takeaway from yesterday’s FOMC decision is that the terminal rate will be higher than what the Federal Reserve forecast in the September dot chart.

"We still have a long way to go," said Powell. "And the data received since our last meeting suggests that the ultimate level of interest rates will be higher than expected."

The next question is: how much higher?

Fed officials heading into the FOMC did not push for a higher terminal rate, so this was new information. It also raises the question of what “certain paths to follow” means. The current rate is 3.75 to 4.00%.

Regarding the December 14 FOMC, the market is banking on a 55% chance of an additional 75 bps and 45% of 50 bps.

Here’s a bit more of what Powell guided:

At some point, as I have said at the last two press conferences, it will become appropriate to slow the pace of increases as we approach the interest level of rates restrictive enough to bring inflation back to our target by 2%. There is great uncertainty around this level of interest rates.

Even so, we still have a long way to go. And the data received since our last meeting suggests that the ultimate level of interest rates will be higher than expected. Our decisions will depend on all the incoming data and their implications for the outlook for economic activity and inflation. We will continue to make our decisions meeting by meeting and communicate our thinking as clearly as possible.

We need to take this at face value and it underscores the importance of incoming data, including Tomorrow’s Nonfarm Payrolls Report.

For now, the market rates market is looking for a terminal high of 5.11%. That hit as high as 5.17% earlier in the day, but cooled off after a smaller-than-expected decline ISM Services Report.

Unfortunately, we don’t have much more to add. Once the Fed blackout is over, we will be watching closely for comments from Fed members suggesting where they think rates are heading.

This article was written by Adam Button on forexlive.com.


cnbctv18-forexlive-benzinga -Sp

Not all news on the site expresses the point of view of the site, but we transmit this news automatically and translate it through programmatic technology on the site and not from a human editor.