Federal Reserve: Data driven rate path – HSBC
HSBC strategists note that the Federal Reserve (Fed) left policy rates unchanged in July, with markets now assigning a two-thirds probability to a September hike.
The Federal Reserve maintained interest rates at their July meeting, as anticipated. The focus now turns to September, with markets assigning a two-thirds probability to a rate hike. Chair Jerome Warsh emphasized a data-dependent approach, highlighting the importance of upcoming economic releases and inflation data in shaping expectations.
Labor market cooling and subdued core CPI figures could prompt reassessments of the timing for further rate increases. Following a robust spring, payroll growth has slowed, and household sentiment indicates a softer labor market than what the unemployment rate suggests. Forecasts for September's CPI and payroll releases, along with potential geopolitical developments in the Middle East, could significantly impact market volatility.
Core CPI data for July met expectations, showing a 0.1% month-over-month increase, while annual headline inflation remains high at 3.4%, indicating stagnating spending power for wage earners and core inflation above the Fed's two percent target.
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