FED GATHERS FOR ANOTHER 75 BPS HIKE – RABOBANK

Philip Marey, Senior US Strategist at Rabobank offered a brief overview of the upcoming FOMC monetary policy decision on Wednesday. The US central bank is all but set to hike interest rates by 75 bps and keep the door open for further policy tightening.

KEY QUOTES:

“The FOMC will start its two-day meeting that will lead to tomorrow’s rate decision, formal statement and press conference by Fed Chair Powell. We expect the FOMC to raise the target range for the federal funds rate by 75 bps to 2.25-2.50%. Meanwhile, the balance sheet reduction schedule is expected to remain unchanged. There will be no update of economic projections, so we only have the formal statement and Powell’s press conference to look forward to.”

“While FOMC speakers have pushed against a 100 bps rate hike this month, Powell may shed more light on the rate path beyond July, especially in relation to the stronger-than-expected CPI print on July 13. With headline inflation rising to 9.1% in June from 8.6% in May, against a Bloomberg consensus expectation of 8.8%, markets initially increased their speculations on a 100 bps hike in July. However, although the FOMC may not be ready to take a 100 bps hike, they may want to take a few more big rate steps in the remainder of the year.”