US Markets
Fed Unlikely to Change Policy Course Despite Dropping Easing Bias, Stifel Says
The Federal Reserve is unlikely to raise interest rates anytime soon, if at all, despite the removal of the so-called easing bias from its monetary policy statement, Stifel said Thursday.The US central bank kept its key interest rate steady on Wednesday for the fourth consecutive time, and removed language suggesting a bias toward rate cuts.The Fed raised its interest rate expectations through 2028 and headline inflation estimates for this year and the next."Dangerously high levels of inflation suggest additional accommodation is now off the table, thus a removal of the lingering easing bias from the statement was not only appropriate, but a necessary step as at least the conversation for rate hikes becomes more pronounced," Stifel Chief Economist Lindsey Piegza said in a note e-mailed to.However, "the bar for an actual reversal in course remains still elevated," she said.Earlier this month, official data showed US annual inflation accelerated to the highest in about three years."Remember, this is a Fed that has been willing to tolerate above-target inflation for years, so any notion of a temporary impact from higher energy prices may not be enough to force the Fed's hand despite ample justification," Piegza said.The US and Iran have signed a memorandum of understanding to end their war and reopen the Strait of Hormuz.New Fed Chair Kevin Warsh announced a series of taskforces on Wednesday to review areas including communication, data sources and inflation frameworks.Most, if not all, of these taskforces are expected to report findings by year-end, Warsh said at a post-meeting press conference.Warsh said he didn't submit his rate forecast in the dot plot, which anonymously shows individual members' expectations regarding monetary policy.The latest Summary of Economic Projections could be the last, or the penultimate edition, as Warsh seeks to overhaul the Fed's communication strategy, beginning with stripped-down monetary policy statement, Saxo Bank said in a note on Thursday.Saxo also underscored Warsh' "distaste for forward guidance of the Fed's intentions."
