Forecasts from 15 big banks on the Fed’s announcement: There will be a pause, but will it be the end of rate hikes?

The US Federal Reserve will announce its interest rate decision on Wednesday, September 20 at 18:00 GMT and, as we get closer to publication time, here are expectations based on the US Federal Reserve’s forecasts. analysts and researchers from 15 large banks.

The Fed is expected to keep rates unchanged at 5.25%-5.50% and point to a rise in November. New macroeconomic forecasts and dot plot projections will be published. Chairman Jerome Powell will begin his press conference at 18:30 GMT.

ANZ

We expect the FOMC to keep rates stable and its restrictive bias. There are signs that both inflation and labor market pressures are easing, but further progress is needed. We expect the FOMC to revise upward its GDP forecasts for 2023 and 2024. This could mean slower speed of normalization in the Fed’s dual mandate, requiring rates to stay higher for longer. We continue to view Fed policy as very data-dependent and patient, with most officials open to further rate hikes if appropriate. Our view is that the Fed has completed its tightening cycle, but the risk remains that further hikes will be necessary..

Danske Bank

We expect the Fed to keep rates unchanged. Markets will focus on how FOMC participants assess the need for further hikes. In June, 12 of the 18 “points” pointed to a further increase, but we doubt it will materialize. Markets have bought into the “more hikes for longer” narrative, and the resulting tightening of financial conditions limits the need for further hikes.

Commerzbank

The Fed is likely to keep the federal funds target between 5.25% and 5.50%. This is because inflation and the labor market are moving in the right direction from the Fed’s perspective, so further rate hikes are not necessary. Rather, rate cuts likely to be on the agenda in the not-too-distant future.

Nordea

We expect that the Fed will not raise rates at this meeting, but that it will maintain a strong bullish bias and that make one last climb in late autumnsince inflation will continue to surprise upwards.

Rabobank

We expect the FOMC to remain on hold in September due to the gradual decline in core inflation and the improving balance in the labor market. The FOMC is likely to remain dependent on data, but will underscore its willingness – underlined by the new dot plot – to pursue another 25 basis point hike before the end of the year if incoming data warrants it. However, we continue to expect economic data to deteriorate ahead of the November meeting and prevent further rate hikes. However, the risk to our baseline is to the upside. As long as the economy remains strong and labor markets tight, further increases are likely..

ING

Although we expect the Fed to maintain interest rates, the door will be open to a possible rise in the future.

TDS

The Federal Open Market Committee is expected to pause rate hikes for the second time in the last three meetings, keeping rates unchanged at 5.25%-5.50%. We expect the Committee to continue shifting to a “higher for longer” rate message, although Powell’s press conference and dot plot revisions could have a hawkish flavor as Fed officials are not likely to completely close the door to additional rate increases.

RBC Economics

The Fed is generally expected to keep the federal funds rate between 5.25% and 5.5%. The Fed remains firmly focused on the data and will not hesitate to raise the interest rate again if necessary (especially if inflation shows signs of reacceleration). But not this week.

NBF

The FOMC is expected to keep the federal funds rate band target unchanged at 5.25-5.50%, with markets giving no chance of an increase. More intriguing than the decision itself is the guidance policymakers will offer for the rest of the year and beyond. A new summary of economic projections and a dot plot will be published.

SocGen

No changes are expected. No we expect further rate hikes this year and expect the first cut to occur in spring 2024. At its September meeting, we expect the Fed to express the possibility of raising rates further due to inflation, but we do not expect them to exercise this option.

Citi

We do not expect a substantive change in the language of the statement and anticipate that the key phrase “in determining the degree of additional policy reaffirmation that may be appropriate…” will remain unchanged. We expect substantial upward revisions to the US GDP forecasts for 2023 and potentially modest downward revisions to the unemployment rate forecast. On the other hand, core CPI forecasts are likely to be reduced by a couple of tenths. This combination of revisions would be relatively neutral, and Fed officials will likely preserve optionality by keeping the 2023 midpoint unchanged at 5.6%. We also expect the 2024 projection to remain unchanged at 4.6%. Chairman Powell will likely strike a neutral tone during the press conference, highlighting the continued reliance on data to determine the need to further tighten or hold the policy rate constant in upcoming meetings.

Wells Fargo

We expect the FOMC to keep the federal funds rate unchanged at 5.25-5.50% as inflation has begun to slow more clearly. However, with price growth still well above target, we expect it to continue with the message that further tightening of monetary policy is possible if new data warrants it.

CIBC

It seems very likely that the Fed will keep rates unchanged and signal that it will depend on data, which may not materially move markets.

BBH

We expect a hard line stance. Recent data has been mixed enough for the Fed to feel comfortable with another hike and the WIRP suggests only a 5% chance of a hike this week. We will most likely see the next hike on November 1st. For that November meeting, we will have one more each of the employment, CPI, PPI and retail sales reports, as well as two PCE readings. YesIf things go as we expect for the US, the current 30% odds of a hike are too low.

ABN Amro

We expect the Fed to hold rates. The September FOMC meeting will also bring with it the quarterly update of the Committee’s forecasts. GDP growth and headline CPI inflation are likely to be revised upwards (due to rising oil prices), but core CPI inflation forecasts will remain broadly unchanged. We also expect minimal changes to the Committee’s outlook for interest rates or the “dot plot”; Rate cut expectations may be reduced somewhat, but we do not expect any changes in this regard to influence the markets. This leaves the markets’ focus on Chairman Powell’s press conference. We expect Powell to be optimistic about the continued cooling of the labor market and accompanying disinflation, which has been accompanied by continued strength in economic growth. At the same time, we expect Powell to reiterate that the Committee remains open to further rate hikes if necessary. He could also point to the recent rise in oil prices as a risk to the inflation outlook, should this push up inflation expectations (not our base case). We still think that the Fed is done raising interest ratesand that a further weakening of the labor market combined with a decline in core inflation will trigger rate cuts from March next year.