US | Fed skips rate rise but hints it is set to hike in July

The FOMC voted unanimously to keep the target range for the fed funds rate unchanged at 5.00-5.25% but a hawkish shift in the updated SEP signaled that, with a more resilient economy and more stubborn inflation, nearly all members think that the Fed needs to do more.

Key points

• Key points:
• The median projection for real GDP growth and core PCE inflation by year-end were revised up to 1.0% and 3.9% (from 0.4% and 3.6% in March), respectively.
• This new scenario was reflected in a hawkish shift for the projected appropriate policy path. The median FOMC participant now projects that the fed funds rate will reach 5.6% at the end of this year.
• Powell said in the press conference that next month’s meeting will be a “live” one, sending a strong signal that a 25bp hike in July is now very likely.
• We now think the odds of a 25 bps hike to a 5.25-5.50% target range in July have risen sharply, but considering that “things are headed in the right direction”, the Fed would likely skip again in September.

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