Bankinter | The Fed met expectations and raised its benchmark interest rate (Fed Funds) by +25 b.p. to 5.25%/5.50% on Wednesday, leaving the door open for more hikes.
Assessment: The most relevant thing is that it leaves open the possibility of a new tightening in September by maintaining a data-dependent approach. The most relevant aspect of this meeting was Powell’s message. In the dot plot of the June meeting, the Fed pointed to two additional hikes in 2023. After Wednesday’s announcement, the big question was whether it would implement another one in September or whether it would end the rate hike cycle. Powell did what had been expected and stated that he will act as the data requires. This is a smart stance that allows for flexibility and not to be tied to any predetermined decision. Especially ahead of Jackson Hole, which will provide an opportunity to clarify positions in a more informal context and with more information than is currently available.