Fed: Likely to peak at 5.00%, not expected to pivot before 2024 – Rabobank

The key event next week will be the FOMC meeting. As most analysts, at Rabobank, they expect the Federal Reserve to raise the target range for the federal funds rate by 75 bps to 3.00-3.25%. They see the rate peaking at 5.00%. 

Key Quotes: 

“We have shifted our Fed forecasts further upward. For the September meeting, we now expect 75 bps instead of 50 bps. The risk to this forecast lies toward 100 bps rather than 50 bps. Next year, we expect the top of the target range to peak at 5.00% instead of the 4.50% that we had in our longer term forecasts earlier.”

“The main reason why we remain above consensus in our forecasts for the Fed and money market rates is that we think that a wage-price spiral has started that will keep inflation persistent. With the Fed clearly prioritizing price stability over full employment, this is going to push the FOMC higher than they currently anticipate.”

“Next year we expect the top of the target range to peak at 5.00% and we do not expect the Fed to pivot before 2024.”