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ANZ: Fed expected to raise rates by 25 bps

ANZ: Fed expected to raise rates by 25 bps

2023/04/27 07:15

Analysts at ANZ said they expect the FOMC to raise rates by 25 basis points at next week's meeting. That would put the target ceiling for the federal funds rate at 5.25 percent. And their baseline forecast is for another 25 basis point hike by the Fed, bringing the rate to 5.50%. 

From a more macro perspective, however, the tightening cycle may be nearing its end. They expect future rate decisions to be made on a meeting-by-meeting basis. Their forecast for GDP is that the lagged effects of last year's rate hike will have a more profound impact in the second quarter. They expect a slowdown in consumption and labor market growth. 

However, core services inflation may take some time to ease. In addition, bank solvency is an issue that the FOMC will consider. It is imperative to control inflation to protect the value of bank assets. They expect the federal funds rate to remain stable in the second half of 2023 to keep inflation in check.

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