The United States Federal Reserve Open Market Committee’s September decision on interest rates was entirely expected, with the FOMC holding rates at the current level of 5.25% to 5.5%. As also expected, the committee indicated there may be another rate hike coming this year, with Chairman Jerome Powell insisting — as usual — in his Sept. 20 press conference that the job of getting inflation back to the Fed’s 2% target is in “no way done.”
What was more of a surprise, however, is the fact that the Fed raised its long-term forecast for the Federal Funds Rate, which they now see as standing at 5.1% by the end of 2024 — up from June’s prediction of 4.6% — before falling to 3.9% at the end of 2025, and 2.9% at the end of 2026. These numbers are notably higher than previous forecasts and indicate a “higher for longer” scenario for U.S. interest rates that not too many market participants were expecting.
Lucas Kiely is chief investment officer of Yield App, where he oversees investment portfolio allocations and leads the expansion of a diversified investment product range. He was previously the chief investment officer at Diginex Asset Management, and a senior trader and managing director at Credit Suisse in Hong Kong, where he managed QIS and Structured Derivatives trading. He was also the head of exotic derivatives at UBS in Australia.