As expected, the Fed “paused” at its September meetings. And while the Fed’s administered rates did not change, the markets interpreted this as a “hawkish” pause, and market rates across the spectrum rose in the aftermath of the Fed statement and the Powell press conference. The “hawkishness” can be seen in the dot-plot chart. The gray dots are the views of the 19 FOMC members as of June for the end of 2023, 2024, 2025 and long-term. The yellow dots are as of the September meeting. The gray line is the median view as of June, the green line as of September. The dot-plot clearly shows the “higher for longer” mantra.
While the forecast for Headline CPI remained the same as in June, the justification for “higher for longer” interest rates was the upward revisions to the Fed’s GDP forecasts, both for the remainder of this year and for 2024. Powell attributed the upward revisions to “strength in consumer spending.” (Readers of this blog know that we have a different view of consumer strength – more on that below).
Support authors and subscribe to content
This is premium stuff. Subscribe to read the entire article.