50 or 75 or 100 bps rate hike?

25 July 2022

Please find below what we expect at the July meeting:

  • We expect the Federal Open Market Committee (FOMC) to hike rates by 75 bps to a range of 2.25%-2.5%, the FED long-term neutral rate estimate, at its July 26-27 meeting.  We do not expect a 100 bps hike despite the strong June CPI (Consumer Price Index), because inflation expectations have dropped.
  • Chair Powell will most likely repeat the committee’s need to see ‘clear and convincing’ evidence that inflation is coming down before moving to a slower pace. 
  • He probably will not provide too much information on the size of the hike in September in order to keep all options open.
  • Chair Powell will likely confirm the doubling of the pace of quantitative tightening in September to $95bn/month ($60 bn in Treasuries and $35bn in Mortgaged-backed securities).

This meeting is expected be a confirmation of Fed data-dependency and should be without a meaningful impact on financial market. We expect the FED to remain hawkish in order to restore price stability with a slightly more balanced tone given weak incoming data. <

Disclaimer
This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française. La Française Asset Management was approved by the AMF under no. GP97076 on 1 July 1997.

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