VEW: Barclays Tweak Fed Call

Barclays note that “taking some signal from the committee's intent to downplay data criteria for determining the appropriate pace of increases, we now expect the FOMC to hike 50bp in December, versus 75bp in our previous call. That said, communications did not rule out a 75bp hike in December, and we think this remains a possibility if the dataflow continues to evolve unfavorably.”

• “We now expect a somewhat more drawn out hiking cycle, but with the same peak rate. As before, we expect the FOMC to hike 50bp in February, but this is now followed by another 25bp increase in March. As before, this places the target range for the policy rate at 5.0-5.25% at its peak, but with the FOMC now concluding that this will be "sufficiently restrictive" to push inflation back down to 2% over time.”
• “We continue to believe that the FOMC will cut its policy rate in three 25bp increments over the final meetings of 2023, following a pause. These cuts will be partly motivated by the need to recalibrate the policy stance, with the real policy rate becoming increasingly restrictive over the course of the year amid declines in expected (and realized) inflation.”