Summary:
The central question facing the Fed is what to do with interest rates at a time when the current economic data shows continued strength and inflation well above the Fed’s target, but stresses in the banking system threaten to derail growth. Traders are pricing in a quarter-point hike in January, according to the CME tool.
2023.3.23(Thursday)02:00
Previous (February): 4.25-4.50% Forecast: 4.50-4.75%
What to watch for：
Does the Fed pause its rate hikes?
Is the Fed prioritizing inflation or financial stability?
How does the Fed interpret SVB failure?
The central question facing the Fed is what to do with interest rates at a time when the current economic data shows continued strength and inflation well above the Fed’s target, but stresses in the banking system threaten to derail growth. Traders are pricing in a quarter-point hike in January, according to the CME tool.
Key data released lately altogether point to stubbornly high inflation and tight job market. U.S. added 311,000 jobs in February, well above expectation of 225,000. Hiring was strongest in the leisure and hospitality sector, increasing by 105,000. CPI measured 6% for the year ended, down from January’s 6.4%, slowing for eight consecutive months though it underlines the potential need of bigger hikes.
But the banking crisis, which raises the risk that banks will pull back significantly on lending to businesses and individuals, could be worsened by continued interest-rate increases. In fact, banks and consumers had already begun pulling back even before the emergence of the banking crisis, according to the Senior Loan Officer Opinion Survey in January.
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