Analysts at Rabobank point out that with a Federal Reserve that is clearly prioritizing price stability over full employment, rates will go higher than currently anticipated. They expect the FOMC to raise the target range for the federal funds rate by 75 bps to 3.75- 4.00% on Wednesday. They do not expect the Fed to pivot before 2024.

Key Quotes: 

“The next meeting of the FOMC takes place on November 1 and 2. Given the high inflation figures published in October, the FOMC is expected to take another giant step of 75 bps in November. Since that will take the top of the target range to 4.00%, and the FOMC had a terminal rate of 4.6% in mind in September, they are likely to slow down the hiking cycle at the next meeting in December.”

“We expect a 50 bps hike in December, followed by two hikes of 25 bps in February and March, which would take the top of the target range to 5.00%. We expect the Fed to remain on hold for the remainder of 2023.”