U.S. Fed Reserve Policy Preview — To Ease Up On Their Hawkish Rhetoric: Reliance Securities

They could hike by 25 bps in March and could change their stance to neutral and say that further rates could be data dependent.
<div class="paragraphs"><p>The U.S. Federal Reserve Building in Washington, D.C. (Source: Reuters)</p></div>
The U.S. Federal Reserve Building in Washington, D.C. (Source: Reuters)

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Reliance Securities Report

The U.S. Fed hiked the interest rates by 25 basis points in February, as they felt it was appropriate to tackle high inflation. However, recent U.S Consumer Price Index this week reflected that the inflation was still high despite retail sales numbers eased, suggesting that the U.S. Fed will raise the interest rate further.

Additionally, U.S. labour market remains tight after the recent spectacular non-farm data in the U.S. rekindled market concerns over Fed interest rate hikes.

The non-farm sector added a surprising 517,000 jobs in January and 311,000 in February. In fact, briefly, there were suggestions that the Fed could do a 50-bps hike in March.

However, that changed after the recent banking sector crisis. Many traders and other market participants speculated that the recent financial market crisis could also prompt the Fed to remain status quo on rates.

The banking sector crisis started in the U.S. and spilled over to Europe as well.

So, we expect the Fed to ease up on their hawkish rhetoric. They could hike by 25-bps in March and could change their stance to neutral and say that further rates could be data dependent.

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Reliance Securities U.S. Federal Reserve March Policy Preview - March 16 2023.pdf


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