US Dollar: December hike odds rise as Fed pauses in October - TD Securities

A Fed Funds Rate of 4.00% in October remains the expectation of TD Securities’ Oscar Munoz and Eli Nir, who believe an FOMC hold would confirm current market pricing without providing fresh forward guidance. With inflation risks still elevated, they argue that leaving rates unchanged now would make a December increase more likely. They also see a non-trivial chance of a larger 50bp rise if the data remain firm.

FOMC expected to hold before resuming rate rises

"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. Learn more.)