Most Fed officials thought the current rate would be the earliest to be present until 2024
Federal Reserve officials are expecting interest rates to rise in 2023 faster than previous estimates.
The news lies behind economic forecasts for fast growth and higher inflation in 2021.
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Following a two-day Fed policy meeting on Wednesday, the US Central Bank has kept its level at 0-0.25% of key interest rates the same since the start of the pandemic.
The move represents a curveball as most Fed officials initially thought the current rate would remain until the earliest time until 2024.
At a press conference Wednesday, Fed Chairman Jeff Powell provided optimistic economic outlook on employment, COVID vaccinations and eased lockdown restrictions.
“There are all kinds of reasons why we think we are in a very attractive number of labor markets because of low unemployment, high participation, higher wages, and higher wages,” Powell said. I did.
Commenting on the Fed’s meeting and the surprising “dot plot,” Kingswood’s chief investment officer Rupert Thompson said, “The Fed’s meeting is at HOP where the infamous Fed’s “dot plot” is the source of surprise. It has gained a little market. Most of the FOMC forecast two-rate hikes in 2023, even if they aren’t like they used to. The market was already priced with two interest rate hikes in 2023, so in a way the Fed simply moved along the market. Federal Reserve Chairman Powell also emphasized that dot plot predictions should be taken with large salt grains. Still, I really didn’t expect any major changes to the vote yesterday. ”
“The reason for the change in visibility is clearly the recent rise in inflation, which has surprised the Fed at its size and has given us more confidence in growth rebounds. The Fed has forecasted this year’s core inflation forecast from 2.1% to 3.0%. “We’ve raised it to the guns, but we’ve stuck with the rise that should be proven temporarily. We’re continuing to predict that inflation will return to 2.1% in 2022.”
“On the other hand, the beginning of QE Tapering has come a little closer, at least in a sense. The Fed says it’s talking about tapering. So the Fed has said it’s a Fed’s tapering. The announcement of the plans will appear to start late this year or early in the next summer.”
“Due to market reactions, US Treasury yields rose 7bps yesterday, with US stocks falling 0.5% and the dollar rose 0.7%. European stocks opened below 0.25% this morning. Stocks are moving relatively small, with 10-year yields remaining below 2 billion bps, at the end of March high.”
European markets remained relatively mild Thursday morning, despite the Federal Reserve saying that the first rate rise could occur in 2023.
Overall, Frankfurt’s DAX 30 index fell 0.2%, while the Paris CAC 40 fell 0.3% in response to the Fed’s curveball.
