The headquarters of the US Federal Reserve (Fed) in Washington
par Howard Schneider et Michael S. Derby
WASHINGTON (Reuters) – The U.S. Federal Reserve left key rates unchanged on Wednesday, the first since March 2022, but opened the door to two more hikes of a quarter-point each by the end of the year. to the strength of the economy.
The federal funds rate target therefore remains set at 5.00%-5.25%, as expected by a large majority of experts polled by Reuters.
“Maintaining the target range at this meeting allows the Committee to assess the additional information and its implications for monetary policy,” the U.S. central bank said in the statement announcing the decisions of its monetary policy committee. , the FOMC (Federal Open Market Committee).
The next increases “will take into account the cumulative effect of past increases, the delayed effects of its policy on economic activity and inflation and economic and financial developments”, she added.
The Fed ends a series of ten consecutive rate hikes in the space of 15 months but its chairman, Jerome Powell, stressed at a press conference that the members of the committee are in favor of the monetary tightening continuing .
He indicated that no decision had been taken for July, that it would be a “live meeting” (open meeting) likely to lead to a rate hike.
THE S&P-500 INDEX TURNS RED
The new economic projections, with a “hawkish” bias, show that the median of expectations of monetary officials sees the main key rate going to 5.50%-5.75% by the end of December.
The central bank’s announcements resulted on the New York Stock Exchange in a decline in the main indices: the Standard & Poor’s 500, the benchmark for investors, lost 0.20% a few minutes from closing. The yield on two-year Treasuries rose above 4.8% for the first time since March 10.
“It looks like the committee members have become even more hawkish since the last meeting and I think that took investors by surprise,” said Sam Stovall, at SFRA Research.
US interest rate futures now price in an estimated 75% probability of a rate hike next month, that of a rate cut by the end of the year is diminishing.
Jerome Powell has indeed rejected the possibility of a reduction in the cost of credit in the year. Nevertheless, the FOMC forecasts a rate cut of 100 basis points in 2024.
Fed projections suggest U.S. GDP this year will come in at 1%, down from 0.4% in the March forecast, and the unemployment rate at 4.1%, down from 4.5% previously . In May, unemployment was 3.7%.
A stronger-than-expected economy implies a slower slowdown in inflation.
Inflation measured by the index favored by the Fed, that of personal consumption expenditure (PCE), is expected at 3.2%, against 3.3% expected in March. In its “core” version, which does not take into account food and energy prices, the PCE should go from +4.7% currently to +3.9% at the end of the year, and no longer to +3 .6%.
(Howard Schneider with Bansari Mayur Kamdar, French version Laetitia Volga, edited by Jean-Stéphane Brosse and Tangi Salaün)
2023-06-14 20:30:34
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