Today (June 15th), at 2 PM ET, the FOMC hiked the US interest rate 75 bps to 1.75%.
This caused strength in the DXY, and weakness in Gold and the S&P 500.
The 75 bps hike was foreseen by many investment banks, as well as the WSJ citing sources familiar.
Rate Statment & Economic Projections
Fed policymakers' projections show they expect to start cutting rates in 2024. Fed forecasts show the longer-run rate at 2.5% vs 2.4% in March.
In their projections, the Fed sees PCE inflation at 5.2% in 2022 (prev 4.3%), 2.6% in 2023, 2.2% in 2024; median long-run forecast at 2.0% (prev 2.0%)
The Fed sees GDP growth at 1.7% in 2022 (prev 2.8%), 1.7% in 2023, 1.9% in 2024; median long-run forecast at 1.8% (prev 1.8%)
Five Fed officials forecast rates above 4% in 2023.
The Fed median forecast shows 2022 inflation at 5.2%, and 2023 at 2.6%.
The Fed forecast shows 2022 unemployment at 3.7%, 2023 at 3.9%, and 2024 at 4.1%.
And the Fed forecasts show the longer-run rate at 2.5% vs 2.4% in March.
Following this, US rate futures price in 93.4% chance of a 75 bps hike in July, and a 55% probability of a 50 bps rise in September after the Fed decision, according to CME's Fedwatch.
And Fed swaps price 75 bps rate hike for July, and 140 bps over July/September.
FOMC Press Conference
Following the rate decision, at 2:30 PM ET, Fed's Chairman Jerome Powell gave his press conference, here are some of his key comments:
I do not expect 75 bps moves to be common, but the next meeting could well be a decision between 50 bps and 75 bps. We don't know how restrictive we need to be. We think ongoing increases in interest rates are appropriate.
Data shows inflation expectations are still in place where short-term inflation is high, but comes down sharply over the medium term. We think the longer-run neutral rate is in the mid-2% range.
Since the Fed's May meeting, inflation has surprised to the upside, and indicators of inflation expectations have risen. Further surprises in inflation could be in store. We also noticed the Fed's inflation expectations have moved up. I do think our goal is to bring inflation down to 2%, while the labor market remains firm, however, what is becoming clear is that many factors we don't control will play a large part in if that happens.
Fluctuations in commodity prices could take the possibility of a softish landing out of our hands.
