While this came as no surprise, the accompanying statement was perhaps a failed attempt to convey hawkish intent. Fed Chair Jerome Powell stated that, as inflation remains elevated and the labour market tight, further rate hikes are very much possible. Concerns over the US banking sector’s fragility were downplayed, with Powell asserting that the sector is ‘sound and resilient’.
Despite the hawkish spin, the market’s major take away was the acknowledgement that the US faces the prospect of a mild recession next year.
Subsequently, market expectations are little changed and the probability of a July rate cut remains over 40%.
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