🏦🇺🇸A December 25Bps Fed Hike Is Base Case: Cable FX Macro
The Cable FX Macro Fed Calls Tracker shows a strong consensus across 14 desks, with 12 desks (85.7%) aligned on a baseline estimate of a single 25 basis point rate hike in December. This modal call, backed by Goldman Sachs, J.P. Morgan, Morgan Stanley, Deutsche Bank, Barclays, HSBC, Nomura, UBS, Macquarie, BNP Paribas, and Standard Chartered, projects a year-end federal funds target rate of 4.00%–4.25%.
The distribution features two clear outliers on opposite ends of the hawk-dove spectrum: Bank of America Global Research represents the hawkish extreme, forecasting 50 basis points of total tightening split across October and December hikes to reach a 4.25%–4.50% target rate, whereas Citigroup stands alone at the dovish extreme with a call for no policy change, leaving the target rate unchanged at 3.75%–4.00%.
The primary risks to this 4.00%–4.25% median trajectory stem from macroeconomic surprises that could push FOMC policy toward either outlier scenario. Upside risks to the rate call—favoring BofA's 50 bp tightening path—include unexpected re-acceleration or persistence in core inflation combined with resilient labor market indicators, which could force the central bank to move earlier in October. Conversely, downside risks—validating Citi's pause call—involve a sharper slowdown in employment growth, tightening financial conditions, or growth contraction, which would compel policymakers to hold rates steady at 3.75%–4.00%. Consequently, upcoming inflation prints and labor market reports serve as the key catalysts capable of disrupting the prevailing 85.7% Street consensus. Â
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