The Fed is pivoting, or not. Here’s a review of some interpretations of the latest meeting minutes.: “All told, the minutes support our view of the Fed moving to a slower pace of rate hikes in the months ahead following the two consecutive 75bp increases in June/July. In effect, we continue to project two consecutive 50bp hikes in September and November. We are also penciling in a final 25bp increase in December to reach a terminal rate of 3.50 per cent-3.75 per cent.
“If we want to take the June median dots as our guidepost, which Powell recommended three weeks ago, then it looks like the Committee’s best guess is that rate hikes continue until some time in the first half of 2023, peaking at just shy of 4 per cent, and then stay there for about a year, before beginning to slowly come off in the second half of 2024. This long pause would mainly reflect the fact that ‘it would likely take some time for inflation to move down to the Committee’s objective’.
“I am largely on board with that plan, except that I believe that the Fed will need to take rates well above 4 per cent before stopping because inflation will prove harder to arrest than officials currently hope.”