Next Wednesday, the FOMC will announce its decision on monetary policy. Analysts at Rabobank point out it has become increasingly likely that the Fed will slow down its hiking cycle to 25 bps.
Decline in inflation has increased the probability of smaller hikes
“The next meeting of the FOMC, on January 31 and February 1, takes place against the backdrop of falling inflation and signs of a weakening economy. What’s more, the annual rotation of regional bank presidents with voting rights is expected to lead to a more dovish set of voters. Therefore, it has become increasingly likely that the Fed will slow down its hiking cycle to 25 bps on February 1.”
“Today’s PCE deflator data for December were largely in line with market expectations and confirmed what we already knew from the CPI data, which is that the peak of inflation is behind us, unless we get new inflation impulses, such as new negative supply shocks or the wage-price spiral getting out of hand. Headline PCE inflation, which is the Fed’s preferred measured of inflation, slowed down to 5.0% year-on-year and core inflation fell to 4.4%.”
“We continue to think that based on the fading momentum of inflation, the FOMC is likely to stop at a 4.75-5.00 target range and pause for the remainder of the year.”
“We still see upside risks to inflation and the federal funds rate during the course of the year if new negative supply shocks take place and/or the wage-price spiral gets out of hand.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
