Federal Reserve: Hawkish path extends into year-end – Commerzbank
Commerzbank’s FX Research team, including Charlie Lay and colleagues, highlight a hawkish shift from the Federal Reserve as it raised the Fed funds target range by 25bp to 3.75–4.00%. The updated dot plot points to another hike this year and higher rates through 2028.
Commerzbank's FX Research team reports that the Federal Reserve is on a hawkish path into the end of the year, with a 25 basis point increase in the Fed funds target range to 3.75-4.00% and a probability of further rate hikes this year and beyond. The latest dot plot indicates that the median Fed funds projection for the end of 2026 has risen to 4.125% from 3.75% in June, suggesting another 25bp hike.
Sixteen out of 18 officials now expect at least one further rate hike this year. The Fed funds futures price a 51% probability of a 25bp hike in October and a total hike of 33bp by year-end. The Fed's decision to tighten policy is driven by tight conditions in the bond market, making a status quo riskier. The next Fed meetings are on October 27-28 and December 8-9, with the latter occurring just before the midterm elections.
The hawkish Fed rate hike is likely the main factor behind the Dollar's support, while AUD/USD gains strength and USD/JPY recovers from a brief dip.
Written by urgent.news from FXStreet's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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