Fed Expected to Hold Rates Steady in October, Focus on December Hike Probability

ME News reports that on October 28 (UTC+8), the Federal Reserve will announce its October monetary policy decision at 2:00 AM Beijing time on October 29. The market widely expects the target range for the federal funds rate to remain unchanged at 3.75%–4.00%, with a probability of over 90% for no change. Attention will focus on the wording of the statement and whether Chair Powell’s press conference releases additional hawkish signals, and how this affects the market’s heavily priced-in probability of another 25-basis-point hike in December. Goldman Sachs, Citigroup, and Crédit Agricole all forecast a pause in October and a 25-basis-point hike in December. Goldman Sachs noted that if rate hikes were to resume every other meeting through 2027, a March hike could be considered, but its baseline forecast does not anticipate a March hike. Citigroup stated that if persistent equity market weakness leads to a sharp tightening of financial conditions, the likelihood of shifting toward rate cuts would increase significantly. Moody’s believes no further hike is warranted or advisable this week. Nomura expects no change in October and notes that the Fed is managing expectations for a pause while preserving flexibility for a potential December rate hike. TD Securities forecasts no change in October and expects two additional hikes in December and March. Huatai Securities expects no change in October, with possibly two hawkish voters dissenting; its baseline scenario anticipates one more hike in December this year and two hikes next year. Morgan Stanley forecasts a 25-basis-point hike in both December and March next year. Bank of New York Mellon expects rates to peak slightly above 4.5%. Bank of America believes there is sufficient justification for a hike in October; if no hike occurs, it would leave only one remaining option for a single move. (Source: ChainCatcher)