Rate hike | The Fed’s decision seen from here

The decision of the US Federal Reserve (Fed) to raise the key interest rate by three quarters of a percentage point was followed and analyzed by many economists here. Overview of reactions.

Posted at 6:00 am

Martin Vallieres

Martin Vallieres
The press

Randall Bartlett

Executive Director, Economic Analysis, Mouvement Desjardins

“With another significant hike in interest rates, the US Federal Reserve is reaffirming its commitment to push inflation too high towards its 2% target.

“In order to restore that price stability, Fed Chair Jerome Powell has acknowledged that the US economy will have to go through a period of below-potential real GDP growth and weaker employment gains.

Therefore, I expect another hike of 75 basis points [0,75 point de pourcentage] next September to end a series of three extraordinary rate hikes in the United States.

“Meanwhile, a recession still looms and a soft landing for the US economy still looks elusive for the Fed.

“Whether it’s an official recession or not, the US economy’s GDP growth next year will be very weak. This could prompt the Fed to reverse the trend by cutting rates before the end of 2023.”

Michael Gregory

Deputy Chief Economist, Director of US Economic Analysis, Bank of Montreal (BMO)

“As expected, the US Federal Reserve hiked 75 basis points [0,75 point de pourcentage] the target range for the federal funds rate, which is now between 2.25% and 2.50%.

“As expected, Fed Chair Jerome Powell also said that another ‘unusually large’ rate hike may be appropriate but remains dependent on economic data developments. In the medium term, the Fed’s action plan remains to adopt a “moderately hawkish” stance on interest rates.

“This sets the stage for the central bank’s next rate hike in September, the size of which has yet to be determined. At BMO, we stand by our forecast for another Fed rate hike of at least 50 basis points. [0,5 point de pourcentage] in September. »

Nathan Janzen

Deputy Chief Economist, Royal Bank (RBC)

“Rising interest rates by 75 basis points [0,75 point de pourcentage] expected, even if it is the second strong increase in a row.

“Fed Chair Jerome Powell reiterated the need for interest rates to reach ‘moderately restrictive levels’ by the end of this year, meaning more rate hikes to follow.

The Fed notes that economic growth is “softening” but its inflation concerns still outweigh growth-related ones. Rising wages and rising consumer demand continue to fuel inflationary pressures.

“Among others, Jerome Powell reiterated that some easing in the labor market is needed to bring inflationary pressures back to their target rate.

“As such, we believe the US economy is poised for contracting GDP and rising unemployment in the first half of 2023 amid rising interest rates and slowing global economic growth.”

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