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Fed Changes Stance On Rate Hikes

Aligned with the consensus, the Federal Open Market Committee (FOMC) delivered a 25 basis point rate hike, along with a statement that included some notable changes from the language present in every statement since March 2022, says Geoff Phipps, a portfolio manager and trading strategist at Picton Mahoney Asset Management. He says it shifted from firm guidance of ‘ongoing increases’ to a softer suggestion that “policy firming may be appropriate,” with another hike likely this year. The revised Summary of Economic Projections (SEP) showed no change regarding median expectations for 2023, yet a slight median increase for 2024.” As Jerome Powell, chair of the U.S. Fed, said rate cuts are not in the Fed’s base case and that inflationary pressures continue to remain stubbornly high, in spite of recent progress. His responses to questions underscored that the Fed will be keenly monitoring the impact of credit conditions, but that it is ‘too soon’ to tell how this uncertain situation will play out. “These remarks suggest that the Fed felt it was premature to make broad assumptions about the influence of credit on financial conditions,” said Phipps.

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