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Bloomberg: Fed’s forecasts proved to be hawkish, positive news for the U.S. dollar

15 December 2022 230
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Source: Bloomberg

Author: Richard Henderson

Article: Original article

Publication date: Thursday, December 15, 2022

Fed Chairman Jerome Powell said that the central bank is capable of taming inflation. According to the Fed’s policy makers, rate hikes would stop next year at the level of 5.1%, which is higher than previously stated and far above market expectations.

Karen Jorritsma, head of Australian equities at RBC Capital Markets, noted that the Fed was way more bearish than expected. The bank is still determined to fight inflation, almost certainly leading to a hard landing of the economy.

Muted moves in the bond market cause doubts about the Fed's ability to raise rates and keep them at higher levels for long.

The Fed increased the benchmark rate by 50 basis points to a target range of 4.25–4.5%. Powell left an opportunity for another 25-basis-point hike at the bank’s next meeting in February. He denied the possibility of changing course on raising rates in the upcoming year.

MLIV Pulse survey data of 112 investors showed that the Fed confused those who were betting on a dovish meeting. It will advance the dollar, but work to the detriment of stocks ahead of the end of 2022.

Forecast: the growth of the dollar index

This content is for informational purposes only and is not intended to be investing advice.

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