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Systematix Research Report
The Federal Open Market Committee announcement of a 75 basis points rate hike to 3.0-3.25% was in line with ours and the broader expectations as reflected in the futures market.
While it dodged the rising expectation of a full 100 bps in the announcement, its guidance turned out to be highly restrictive. The most important part of the announcement was the revised summary of economic projections, which guides for a higher rate trajectory and the emphatic preclusion of rate easing even till end of 2024.
The terminal rate is seen at 4.6% for 2023 and a cumulative additional hike of 150 bps before end of 2022, or 100 bps higher than the June-22 projections.
The real rate is expected to increase by an additional 400 bps including the latest 75 bps hike to 1.6% by end of 2024. The Fed chair has reiterated the central bank's motive to remain firmly committed upon his commentary in the Jackson Hole speech.
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