Summary:
The Federal Reserve maintains interest rates unchanged but predicts another rate hike this year and a decrease in the number of rate cuts.
The Fed held interest rates on hold on Wednesday as expected but signalled support for another rate hike this year and fewer cuts in 2024.
The Fed’s dot plot showed the likelihood of one more increase this year and two cuts in 2024, two fewer than estimated in June’s update. Over the longer term, FOMC pointed to a funds rate of 2.9% in 2026.
Policymakers also sharply revised up their GDP growth forecast for this year to 2.1% from 1%, and to 1.5% from 1.1% for 2024. Powell said there was still a path to bring inflation down without excessive job losses.
Oil prices fell about 1% to a one-week low the Fed stiffened its hawkish stance. The yen is down 11% on the dollar this year as expectations firm for US rates to stay high and Japanese rates to stay low.
Still, oil markets are flashing signs of tightness. US inventories declining 2.14 million barrels last week and the spread between November and December WTI futures jumped above $1.30 a barrel, the widest since November.
JP Morgan said ‘the price of oil could jump much further to as high as $120’ before easing to $86 by year’s end. The bank warned three-digit oil prices would likely push global inflation to around 6%.
WTI has been diverging with the MACD on its way to 93 level, so a correction seems the path of least of resistance.
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