US Dollar: December hike odds rise on October Fed pause - TD Securities

Current market pricing would be validated by an October pause at a Fed Funds Rate of 4.00%, according to TD Securities’ Oscar Munoz and Eli Nir, who expect the FOMC to leave rates unchanged without offering fresh forward guidance. With inflation risks still elevated, they argue that holding rates now would make a December hike more likely. If the data remain firm, they also see a non-trivial chance of a larger 50bp increase.

Will an FOMC pause pave the way for further rate hikes?

"We expect the FOMC to keep rates on hold this week despite rising inflation risks. The chance of a surprise hike is higher than normal, but we believe they will prioritize patience and wait until December."

"A hold in October will make a December hike all the more likely. After the upside surprise in September CPI, inflation risks are still pertinent."

"The Fed will likely keep rates on hold this week, but we do not expect much new communication from the FOMC or Chair Warsh."

"We expect the Fed to hike two more times (December and March). Inflation remains above target while risks are growing."

"The evolution of inflation data will determine the extent and pace of hikes later in the cycle."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)