U.S. futures fall, dollar soars after Fed, BOE decision - what's moving markets
Investing.com — U.S. stocks seen lower, while the dollar soars and U.S. bond yields head higher after the Federal Reserve suggested interest rates will stay higher for longer in the wake of its latest policy decision. The Bank of England faces a tricky rate decision, while the Swiss National Bank halted its rate-hiking cycle.
The Federal Reserve held interest rates steady on Wednesday, as widely expected, but adopted a more hawkish stance, predicting that monetary policy will remain tighter through 2024 than previously expected.
Fed officials, as a whole, see the benchmark overnight interest rate peaking this year in the 5.50%-5.75% range, implying another hike of 25 basis points before the year’s end.
However, it’s next year that the U.S. central bank has really stiffened its stance, with its updated quarterly projections showing rates falling only 50 basis points in 2024 compared to the 100 bps of cuts suggested at the meeting in June.
In a response, Goldman Sachs now expects the Fed to begin its interest rate-cutting cycle in the fourth quarter of next year, later than an earlier forecast of a cut in the second quarter.
«Today, participants appeared to move away from the view that monetary policy tightening could weigh on growth with a long lag next year, which weakens one argument for cutting,» Goldman Sachs economists led by Jan Hatzius said in a note.
«We think this means that inflation will have to fall further than we previously assumed for the FOMC to cut.»
On the plus side, the Fed’s newest economic forecasts suggested economic growth would slow next year to about 1.5%, from 2.1% this year, an improvement from the predictions three months ago of just 1.1% growth next year, after just 1% this year.
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