Home›Forex›Central Banks›ING expects Fed to hold rates as risks of a surprise h…

ING expects Fed to hold rates as risks of a surprise hike linger

ING pegs the odds of no rate move at about 60:40, citing June inflation cooling, reduced Iran-linked tensions, and weaker US growth signals outside the tech sector.

Reported · Written up by our desk · Central Banks

ING strategist Padhraic Garvey expects the Federal Reserve to keep rates unchanged at the upcoming FOMC meeting, assigning roughly 60:40 odds to a hold versus a move. FXStreet reports the view is grounded in calmer June inflation readings, easing geopolitical tensions tied to Iran, and signs of vulnerability in the US economy outside tech support.

Garvey also pointed to inflation expectations and the shape of the yield curve as reasons the case for hikes is limited. According to his argument, the curve does not look set up for the start of a sustained rate hiking cycle, with the 5-year segment described as “rich” relative to the curve.

Still, he flagged a non-negligible risk of a surprise 25 basis point hike and said the market has been “paving a path” toward that possibility due to concerns about inflation moving above preferred ranges. He added that if policymakers want to deliver a precautionary hike, doing so at the current meeting could be preferable to waiting until markets have already priced it in, though ING does not expect a hike in its base case.

The FXStreet write-up notes that the broader market backdrop is cautious ahead of the Fed decision, and includes commentary that GBP/USD has been trading near the 1.3300 area as traders weigh expectations for Wednesday’s meeting.

Latest closeGBP/USD 1.329 ▼0.2%

More like this

Sources