UBS:
The market thinks the Fed has concluded the tightening process and the next move will be a cut (fully priced by September, or in three meetings' time), but US economist Jason Furman disagrees. He was tweeting through Fed Chair Powell's press conference and said that while forward guidance had been discarded, It meant the Fed would be fully data dependent and "I expect that data to drive them to a few more rate hikes but we'll see."
He toned that down later, and said he now thinks there's one more hike to came to a terminal of 5.50./4. His main argument for another hike rests on inflation still being too strong. Note that if the Fed does think another hike is required, then it will need to get some messaging done as the market Is taking Its cue from the anticipated tightening of bank lending standards.
Rabobank:
Powell still believes in a soft landing, but his own staff expects a mild recession starting later this year, with a recovery over the subsequent two years. We have been forecasting a US recession in the second half of 2023 since last year. In fact, we think a recession is inevitable if the Fed wants to get inflation back to its 2% target rate. What’s more, the dependence of the FOMC on tightening credit conditions going forward has reduced the probability of a soft landing even further. However, since the FOMC is in Volcker-mode and core inflation and nominal wage growth remain persistent at elevated levels, we do not expect a pivot by the Fed (i.e. rate cuts) in 2023. At the same time, we expect no further rate hikes for the remainder of 2023. The FOMC is likely to wait and see what the lagged impact from the hiking cycle is, how credit tightening unfolds, while problems at banks may further discourage the Committee from hiking further this year
BMO:
While the Fed isn't slamming the door shut on another rate hike, the default position is to do nothing unless the economy and/or inflation surprise to the high side.
The reaction in Treasury markets was muted, suggesting the FOMC pretty much nailed its policy communication
CIBC:
The communication change reflects new uncertainties over the banking system, while admitting that tighter credit conditions, which presumably would include both higher rates and recent banking developments, will weigh on growth and inflation, but to an uncertain degree.
This is a hawkish pause, as the committee says it will be looking for signals on the need for additional firming, rather than a balanced statement that would have referenced potential moves in either direction. Similarly, they say they are "highly attentive" to inflation risks, with no similar statement on recession risks. But if, as we expect, Q2 sees little or no growth, and inflation signals continue to moderate, the May hike should prove to be the last for this cycle, with the first easing not likely until 2024, as we'll also need time for inflation pressures to sufficiently abate.
ING:
At this point we suspect it will suggest no change through year-end with potentially 75-100 basis points of cuts pencilled in by the Fed for next year. Powell again acknowledged that his personal forecast is for modest growth, not recession even though the Fed staff forecasts remains for a “mild recession”
Historically, the Fed doesn’t leave it long before cutting rates – over the past 50 years the average period of time between the last rate hike cycle and the first rate cut has only been six months.
We think the Fed will wait until the fourth quarter, but will end up cutting interest rates more aggressively, at least in the early stages. We forecast 50bp rate cuts at both the November and December FOMC meetings with the Fed funds rate getting down to 3% by mid-2024
TD Securities:
With the Fed dropping its language on the need for more hikes, it signaled that it is moving to a meeting-by-meeting approach. This leaves its options open going forward. Don’t be surprised if Chair Powell tries to keep the door open to more rate hikes at his presser, should the recent momentum in consumer spending and the pass-through to services inflation continue.
Although the Fed's statement keeps the door open to further hikes, markets think that the Fed is done. The knee-jerk reaction to the announcement was a drop in Treasury yields and a depreciation in the U.S. Dollar. Markets are looking for the Fed to remain on hold through the summer before starting to cut rates as early as September. Approximately 75 bps in cuts are priced in over the back half of 2023. Although we too think the Fed is likely done with further rate hikes, we think September is too early for cuts. Given the lagged effects of the Fed's past rate hikes and recent tightening in financial conditions, we think rate cuts are more likely to start at the very end of 2023 or early 2024
Barclays:
The Federal Reserve signaled a potential pause in rate increases at the June meeting following a 25 basis-point rate rise on Wednesday, but this isn't guaranteed. The Fed indicated the possibility of further rate rises if the economy proves more resilient than expected.
For the Fed to pause rate increases it will need to be confident that with the current policy stance, economic activity gradually slows, the labor market cools with the unemployment rate increasing, and core PCE inflation continues to moderate.
Comentarios