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The Open Market Committee has made a decision on US interest rates. One might even go so far as to say that it could not have been otherwise – at the September meeting, interest rates remained unchanged, having risen eleven times during this cycle of monetary tightening. However, the decision itself is not decisive for the market – the macroeconomic forecasts of FOMC members and what Fed Chairman Jerome Powell will say in his press conference at 8:30 pm are of much greater importance.
There was no surprise, as interest rates were supposed to remain unchanged
It was passed at the September meeting of the Open Market Committee Leave US interest rates unchanged. This means that the federal funds rate range remains in place It is 5.25-5.50 percent.This is after the Federal Open Market Committee decided to raise the interest rate on the dollar by 25 basis points at the previous meeting in July.
The committee’s decision in September is fully in line with market expectations One could even say that consensus is rarely this strong. Before today’s decision, up to 99 percent of futures market participants bet on such a scenario by only 1 percent and assumed that there would be another increase in interest rates by 25 basis points.
Behind us Eleven increases in US interest rates, which rose at the fastest pace yet in the reserve’s entire history. Total interest rates on the dollar in this monetary tightening cycle It rose as much as 525 basis points.
Is this the end of monetary tightening in the United States, and will there not be an interest rate increase for the twelfth time?
— Federal Reserve (@federalreserve) September 20, 2023
According to the latest, Federal Open Market Committee (FOMC) macroeconomic forecasts for SeptemberTwelve members of the committee see another increase in interest rates in 2023. Interestingly, Interest rate expectations at the end of 2023 were unchanged compared to those in June It is still 5.6 percent.
However, interest rate expectations at the end of the following years have changed significantly – Interest rates are expected to reach 5.1% at the end of 2024. (Previously: 4.6%), It is expected to decrease to 3.9% in 2025. (Previously: 3.4%), and at the end of 2026 the interest rate will fall to less than 3%. (2.9% to be exact). This means that, according to members of the Federal Open Market Committee We cannot rely on dynamic easing of monetary policy in the coming quarters.
The important thing also deserves attention Raising real economic growth expectations in 2023 compared to June – Real GDP growth is expected to reach 2.1% this year. (compared to the previous 1 percent) and 1.5 percent, compared to the June forecast of 1.1 percent.
It was the Federal Open Market Committee’s September forecast, specifically its very hawkish nature, indicating a slower cut in interest rates than previously expected, that boosted the dollar. The EUR/USD exchange rate recorded a sharp decline of approximately 0.5%.. Prices fell to the level of 1.06735. You have to pay more than 4.31 Polish zlotys for 1 dollar, although before the announcement of the FOMC decision, the exchange rate was below the maximum of 4.30.
– Daniel Kostecki, CAI (@Dan_Kostecki) September 20, 2023
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