The Federal Open Market Committee (FOMC) voted unanimously to hike by another 50 bps. Economists at HSBC still expect a final 50 bps rate hike by the Fed in early 2023 but do not expect rate cuts until 2024. They look for USD weakness during 2023.

No rate cuts until 2024

“A slower hiking pace and a recognition that the Fed is in the late stages of the tightening cycle are part of why we expect further USD downside in 2023.”

“If slowing US inflation allows the Fed to pare back its hawkishness further and global growth avoids an onerous slowdown, the ‘safe haven’ USD will likely weaken further from here.”

“We still think that the FOMC will raise its policy rate by a final 50 bps in February 2023, while admitting upside risks. The FOMC is expected to deliver 50 bps of rate cuts in 2024 (25 bps in Q2 2024 and 25bp in Q3 2024), bringing the federal funds target range back down to 4.25-4.50% by the end of 2024.”