Federal Reserve and BoE expected to end hiking cycle this week despite persistent inflation
Andy Burgess, fixed income investment specialist at Insight Investment, explained that further rate hikes were looking 'increasingly unlikely'.
The Federal Reserve will issue its decision on interest rates at 6pm today (1 November), while the Bank of England will reveal its next step for rates at 12pm tomorrow (2 November).
Markets currently give a 97.2% chance that the Fed will hold rates steady today, according to data from CME Group.
However, Joost van Leenders, senior investment strategist at Van Lanschot Kempen, argued that although the chance of a hike was low, a pause was not «a done deal».
«The US economy surged in the third quarter, the labour market was stronger than expected in September, and core inflation accelerated somewhat in September — all factors that present potential reasons for the Fed to hike,» he said.
Euro area inflation falls to lowest level in two years as GDP shrinks
Last week, the US Bureau of Economic Analysis revealed that US GDP had risen by an annualised rate of 4.9% in the third quarter, surpassing expectations and representing the strongest quarterly growth for the US since 2021.
Nevertheless, forecasts indicate that some of the strength in the US economy is expected to fade in the fourth quarter, and with the risk of spooking the equity market with a surprise hike, van Leenders still expected a pause. However, he noted the Fed will continue to want to sound «somewhat hawkish».
«A dovish tone could ease markets and undo the recent tightening of financial conditions, ultimately leading to more work to be done by the Fed,» he said.
Franck Dixmier, global fixed income CIO at Allianz Global Investors, said that despite the recent spike in US economic growth, he still viewed a recession as
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