Fed to resume hiking cycle in July – Rabobank

Next week, the FOMC will hold its meeting, and the Federal Reserve is expected to keep rates unchanged. Analysts at Rabobank see the US central bank resuming the hiking cycle in July.

Key quotes: 

“Given Powell’s bias toward a pause in June, we expect the FOMC to keep the target range for the federal funds rate unchanged this month.”

“Previously, we expected the FOMC to remain on hold for at least the remainder of the year after the May meeting. However, because of the reacceleration of the economy, and the modest impact of the banking turmoil on credit conditions, we now expect the FOMC to resume the hiking cycle in July in order to get inflation under control. For now, we expect one rate hike of 25 bps, followed by a longer pause, at least through the end of the year.”

“The risk to our new baseline forecast is to the upside. The longer the recession that we think is inevitable to end this spell of high inflation stays away, the more rate hikes will be needed to get there.”