New report from the US Central Bank: broad support for further rate hikes

On Wednesday evening, the US central bank presented the minutes of its interest rate meeting, which was held three weeks ago. Then the Fed stated that the interest rate should be kept at the level of 5.0-5.25 percent.

Although the decision was unanimous, many are said to have advocated for the rate increase. The minutes show that the Fed paused due to uncertainty related to economic growth. With interest rates rising ten times in a row, the hike was the sharpest since the 1980s, and the interest rate seems to be, you know, falling behind.

However, according to the minutes, all members of the interest rate committee expressed that it would be right to raise interest rates further, but not at the same rapid pace. With the help of several increases of 0.75 percentage points and 0.5 percentage points, the central bank raised the interest rate from zero to five percent in just over a year.

The still tight labor market and the upside risks to inflation are some of the things being highlighted as arguments for further tightening. In connection with the June meeting, the Fed presented new estimates for future interest rate setting, which entailed two more rate hikes from the current level, i.e. to the range of 5.50-5.75 percent.

Currently, the market is pricing in a 90 percent possibility of a 0.25 percentage point rate hike to 5.25-5.50 percent at the July 26 interest rate meeting, according to CME Group’s outlook. There is also a certain probability that the interest rate will go up by another notch at one of the subsequent interest rate meeting.

– There was a broad consensus about a pause in June, but almost everyone expects another increase in 2023. Unless the economy really crashes in the next few weeks, there will definitely be another Fed hike in July, says Chief Economist Marius Gunsholt Hov at Handelsbanken.

The market did not react significantly to the report. Market interest rates have increased marginally, while the stock market has decreased slightly.

– Having said that, the market moved more in the direction that there were actually two more Fed hikes – as directed by the central bank – and it won’t be too far back before the market has more doubts about the interest of the Fed’s rate plans.

The chief economist says higher US interest rates could mean higher Norwegian interest rates.

In isolation, the pressure continues on the Bank of Norway. The peak in interest rates has not yet been fully reached among Norway’s trading partners, and that is hampering interest rate expectations here at home as well, says Hoff.(conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We’d like you to share our statuses using links that lead directly to our pages. Reproduction or other use of all or part of the Content may be made only with written permission or as permitted by law. For more terms see here.