Fed-The markets expect a key rate of more than 5% by March | Photo credits: Istock
Nov 3 (Reuters) – The Federal Reserve (Fed) will raise its key rate above 5% by March and hold it there for most of 2023, currency futures show. US interest rates, with the aim of reducing inflation.
The US central bank on Wednesday raised by three quarters of a point, to 3.75%-4%, the rate target for federal funds (“fed funds”), the Fed’s main monetary policy instrument.
While the president of the institution, Jerome Powell, declared that a slowdown in monetary tightening “could occur as early as the next meeting or the one after”, he also indicated that there was “some way to go” in the rate hike and that a break was not on the agenda.
“Incoming data since our last meeting suggests that the final level of the rate will be higher than expected,” he said at the press conference after two days of discussion.
In September, central bank projections showed that the federal funds rate target should peak at 4.60% in 2023.
Following Jerome Powell’s statements, futures are pricing in the rate target to be between 5% and 5.25% after rising half a percentage point in December and February, and at least a a quarter-point increase in March.
Traders also believe that there is almost as much chance that the range of rates will be increased to 5.25%-5.5%, before falling back below the 5% mark towards the end of 2023. (Report Ann Saphir ; with Lucia Mutikani, French version Laetitia Volga, edited by Jean-Stéphane Brosse)