Fed Wrap - The US Federal Reserve delivers on fight against inflation
Key takeaways
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The September Fed meeting was surprisingly hawkish, with the Fed delivering a unanimous hike and showing a median expectation of further tightening this year.
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The summary of economic projections showed that Fed members expect the US economy to continue to grow at a solid pace while unemployment remains low.
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While the Fed under Chair Warsh might have gained credibility, the next challenge they face is the amount of policy tightening that they will need to deliver and the pace.
Ryan Weldon, from IFM Investors’ Debt Investments team in New York, features in our Fed Wrap market analysing the outcomes from the latest meeting by the US Federal Reserve (Fed).
In this edition, Ryan discusses how the meeting was surprisingly hawkish, with the Fed delivering a unanimous hike and showing a median expectation of further tightening this year.
While Chair Warsh and the Fed have gained credibility with this policy decision, they now face the challenge of the quantum and pacing of future rate hikes. We will cover these topics and more during this episode of Fed Wrap.
The Fed unanimously hiked rates, bringing the upper band of its policy rate to 4%. In the statement, the Fed noted the resilience of domestic spending, productivity growth, and the jobs market despite elevated uncertainty.
Additionally, the Fed commented that this hike will support a timelier return to the committee’s 2% inflation target, shedding some light on the reasons behind their decision.
The most notable aspect of the meeting was the hawkish bias in the dots, which showed median expectations of one additional hike in 2026 and stable rates throughout 2027. The distribution of dots shows that a majority of Fed members agreed with this baseline, suggesting that they believe that their fight against inflation will require more work in the coming quarters.
Ryan Weldon
Ryan supports the dealing and portfolio management functions of IFM Investors’ cash and fixed income portfolios in the US. He also assists in the execution of foreign exchange and derivative overlay strategies for internal and external clients.
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