Fed Preview: Forecasts from 14 major banks, preserving the option of hiking once more


The US Federal Reserve will announce its Interest Rate Decision on Wednesday, November 1 at 18:00 GMT and as we get closer to the release time, here are the expectations as forecast by analysts and researchers of 14 major banks. 

The Fed is set to leave rates unchanged for a second consecutive meeting but Fed Chair Jerome Powell is expected to keep door open to more hikes. Update macro forecasts and Dot Plots will not come until the December meeting.

Danske Bank

We expect the Fed to remain on hold in the November meeting, in line with consensus and market pricing. As financial conditions have tightened significantly, we doubt the Fed will opt for hikes at a later stage either. Rise in term premium suggests higher yields are driven by other factors than the Fed’s forward guidance, which could spark more cautious tone from Powell. 

ANZ

We expect the FOMC to leave rates on hold and that its attention in coming months will evolve to focus on how long rates will need to stay at peak levels. We are of the view that recent developments in core inflation and the labour market support our analysis that rates have peaked. However, the risk that growth momentum remains strong in coming months is a wild card that needs to be acknowledged. We therefore remain focused on incoming economic data.

Commerzbank

The Fed is likely to leave the target range for the fed funds at 5.25%-5.50%. Only if the recent very high pace of growth does not weaken is a further rate hike to be expected – but not before December at the earliest.

Nordea

Fed meeting will likely be a rather uneventful event. The Fed will keep rates unchanged at 5.25% to 5.5%. With no new forecasts, Powell’s press conference will be most important for investors. We don’t think the Fed has been convinced that a new hike is needed still, even with strong macro data from the US over the last week. That does not mean that rate cuts are on the horizon either. The Fed will still put emphasis on upside risks for inflation and for the need for high rates for longer.

ING

We don’t expect any change to policy rates after the recent spike in Treasury yields prompted a tightening of financial conditions throughout the economy. The market seems to be doing the heavy lifting, so there isn't any need for the Fed to do much more – despite growth and the jobs market remaining hot and inflation still well above target. Fed Chair Jerome Powell has also acknowledged that long and variable lags between the implementation of rate hikes and the real-world impact point to the possibility that the full impact of policy tightening could still be yet to take full effect.

Deutsche Bank

We expect the Fed to stay on hold and see future hikes as a function of financial conditions and the path of the economy. While our baseline is for rates to stay at 5.3% through year-end, we see an increasing risk of a hike in December or Q1.

TDS

The FOMC is widely expected to extend a pause to rate increases again, keeping the Fed funds target range unchanged at 5.25%-5.50% for a second consecutive meeting. We expect the Fed to maintain its broadly hawkish policy tilt as it stays consistent with its signaling of an additional rate increase through the dot plot. However, the Fed will reiterate that it aims to ‘proceed carefully’ as it formulates the next policy steps.

Rabobank

We expect the FOMC to remain on hold, stress its data dependence and intention to proceed carefully. During the press conference, we expect Powell to keep the door open to a rate hike in December. However, for the remainder of the year, we expect the bond market to do the Fed’s work, making further policy rate hikes redundant. Meanwhile, the focus of the FOMC may be shifting from how high to raise the policy rate to how long to hold the policy rate at restrictive levels.

NBF

The FOMC is poised to leave the target range for the federal funds rate unchanged at 5.25% to 5.50%. Chair Powell has said that policymakers can proceed carefully ‘given the uncertainties and risks, and how far we have come’. Moreover, a number of FOMC participants have suggested the run-up in longer-term interest rates might substitute for additional policy rate increases.

RBC Economics

The Fed is widely expected to hold interest rates unchanged again in October after skipping a hike in September. US economic growth numbers have remained exceptionally resilient, but inflation pressures moderated over the summer and that is allowing the Fed room to be patient as they wait for already high interest rates to slow growth with a lag.

SocGen

Inflation has fallen back from its highs, but core inflation of just under 4% remains well above target. We see a need for the Fed to remain on hold. We see the prevailing FFR of 5.25-5.50% as appropriately restrictive given current inflation and growth, but the rate becomes increasingly restrictive if inflation subsides as expected. Fed officials have signalled they want additional information on how the economy has responded to yield increases before taking additional steps. We expect that by early next year, inflation pressures can subside and growth moderate to paces that allow the Fed to stay on hold. Rate cuts are our view of the next fed funds rate change, but employment weakness, which we expect near mid-2024, needs to be the trigger for such action.

BMO

We look for no change in Fed policy. A prolonged pause could be unfolding, but it’s still premature to rule out another rate hike on December 13 or at the end of January.  We’re expecting the economic indicators to weaken meaningfully in the month or two ahead, sufficient to forestall further rate rises. Amid the lagged impact of policy rate hikes along with dwindling excess savings and tightening credit conditions, we reckon the headwinds from higher bond yields, the resumption of student loan payments and the autoworkers’ strike should do the trick. Then there are the risks posed by a potential government shutdown (after November 17) and a potential spike in oil prices owing to geopolitical developments. However, our expectation for the indicators could turn out to be incorrect; and if it is, so too will be our call for the current fed funds target range (5.25%-to-5.50%) marking the rate apex this tightening cycle.

Citi

We expect the Fed not to hike. However, given strong economic data and stronger September core CPI and PCE prints the Fed and Chair Powell will likely want to keep optionality in their language. It would also not be surprising were the Fed to add some language on determining how long to keep policy rates at restrictive levels. Chair Powell will once again try to walk a tightrope during the press conference emphasizing that at this juncture the FOMC ought to move cautiously in coming meetings. He will likely explicitly link caution in proceeding with rate hikes to the rapid rise of longer-term yields, as he did in a recent speech. He may also recognize that the resiliency of the economy so far and remaining upside risks to inflation likely imply that the policy rate needs to stay elevated for some time.

Wells Fargo

We expect the FOMC to leave the target range for the FFR unchanged at 5.25%-5.50%. While inflation is moving back toward the FOMC's 2% target, there is further progress to be made. We believe the FOMC will want to keep its options open for further tightening, and thus think the post-meeting statement will maintain the language that signals some additional policy tightening may be appropriate. We continue to anticipate the terminal rate of this cycle has been reached, though we acknowledge it is possible the FOMC will hike rates an additional 25 bps before the end of the year.

 

Share: Feed news

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Recommended content


Recommended content

Editors’ Picks

AUD/USD drops further to 0.6250 amid mounting trade war fears

AUD/USD drops further to 0.6250 amid mounting trade war fears

AUD/USD extends losses to test 0.6250 amid mounting trade war fears, fueled by US President Trump's tariff plans. Furthermore, RBA rate cut bets, China's economic woes and a modest US Dollar strength amid risk aversion drag the Aussie away from over a one-month peak. 

AUD/USD News
USD/JPY regains 155.50 as Trump's tariff plans boost US Dollar

USD/JPY regains 155.50 as Trump's tariff plans boost US Dollar

USD/JPY builds on the overnight bounce from a six-week low and regains 155.50 in Tuesday's Asian trading.Softer Japanese service-sector inflation data provided extra legs to the pair's recovery. Moreover, US President Donald Trump's tariff plans-led USD strength underpins USD/JPY. 

USD/JPY News
Gold down but not yet out as Trump and Fed grab attention

Gold down but not yet out as Trump and Fed grab attention

Gold price licks its wounds following the sharp pullback from three-month highs just shy of the all-time peak of $2,790. Gold trades take account of the latest tariff talks by US President Donald Trump and his administration as attention turns toward mid-tier US economic data and Federal Reserve policy announcements.

Gold News
Ripple's regulatory approvals from New York and Texas fail to boost XRP price

Ripple's regulatory approvals from New York and Texas fail to boost XRP price

XRP briefly slipped below $3.00 on Monday following Ripple's announcement that it has obtained Money Transmitter Licenses in New York and Texas, permitting customers in the region to enjoy its services.

Read more
What is DeepSeek, and why is it important?

What is DeepSeek, and why is it important?

Several Chinese companies pivoted into making their various AI model offerings open source last week, sending shockwaves through the tech sector. Chinese tech startups look set to disrupt the AI space, which has, until recently, been almost singularly dominated by high-priced US tech giants and soaring valuations.

Read more
Trusted Broker Reviews for Smarter Trading

Trusted Broker Reviews for Smarter Trading

VERIFIED Discover in-depth reviews of reliable brokers. Compare features like spreads, leverage, and platforms. Find the perfect fit for your trading style, from CFDs to Forex pairs like EUR/USD and Gold.

Read More

Forex MAJORS

Cryptocurrencies

Signatures