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  • baptistedefontenay

What can we expect from the FED'S first meeting of 2023

28/01/2023





I already published yesterday, so today is not a "proper news", but just a quick reminder to connect on your FT app on February 1st to see what the Fed announces for the short-term interest rates. The consensus is that the Fed will rise the rates by 25 basis points, less than previously expected, due to the slow down of inflation over the past months. I think that markets have priced in such policy, so such an announce should not have a major impact. However, several economists, including Mohammed El Arian, advocate for the previously planned 50 basis point increase. Reasons are: - inflation seems to shift from goods to services - a sector where it is more difficult to fight inflation - in the medium run China might reopen imports leading to inflationary pressure - the US labour market is particularly tense, which might lead to inflationary pressure, for example Walmart has already announced that it will raise salaries from 12$ to 14$ per hour. Hence, rising rates by 50 basis points would be to play safe and ensure not to fight the same fight twice.

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