US | Is the Fed done raising rates?

With the only change to the policy statement being a somewhat more upbeat assessment of the economic expansion pace, the door for an additional 25bp hike in September remains wide open, but another skip is more likely in our opinion.

Key points

• Key points:
• The FOMC voted unanimously to raise the fed funds rate by 25 bps to a 5.25-5.50% target range, the highest level in 22 years.
• Chair Powell stated it will still take time for the “full effects” of past rate hikes to be realized, especially in core inflation.
• Core inflation will likely soften enough over the next two months to persuade the Fed to skip again in September.
• The data-dependent approach would probably end in November, with the Fed shifting its focus to reinforce the “higher for longer” rhetoric.
• We continue to think that the Fed will start a rate-cut cycle in 1H24.

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