In the wake of the US Federal Reserve's latest policy announcement, Robert Sockin of Citi shared insights with CNBC-TV18 that suggest a significant shift in the central bank's approach. According to Sockin, the Fed appears to be done with rate hikes and is transitioning into a 'wait and watch' mode.
NSE
“This is a Fed that really wants to be done hiking, really wants to move into a wait-and-see mode, and see how the data evolve from here,” he said.
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Following its two-day meeting in Washington, the Federal Reserve's policy-setting Federal Open Market Committee on Wednesday (November 1), decided to leave the benchmark lending rate unchanged for the second time in a row, at 5.25% to 5.50%.
In the official statement, the Fed talked about the robustness of the US economy while acknowledging the growing financial challenges faced by households and businesses.
Since March 2022, the US Federal Reserve has taken a forceful stance, increasing interest rates on 11 occasions, all in a bid to combat rising inflation. The US economy has managed to evade a recession, maintaining a robust annual economic growth rate of 4.9%, driven primarily by consumer spending. Despite a slight decrease from last summer's four-decade high, the inflation rate continues to surpass the Federal Reserve's target of 2%.
| Jerome Powell's comments | |
| October 19 - at Economic Club of New York | November 1 - FOMC statement |
| A few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal. | Job gains have moderated since earlier in the year but remain strong, and the unemployment rate has remained low. Inflation remains elevated. |
| We cannot yet know how long these lower readings will persist or where inflation will settle over the coming quarters | Tighter financial and credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. |
| Additional evidence of persistently above-trend growth, or that tightness in the labour market is no longer easing could put further progress on inflation at risk and could warrant further tightening of monetary policy. | The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. |
Sockin noted that the Federal Reserve's statements suggest a patient approach to reducing rates, showing caution in monetary policy changes. They also appear to have set a high threshold for any new rate hikes.
Also Read: Fed Chair Powell says slowing inflation may require slower economic growth and more rate hikes
He anticipates that a recession may unfold by mid-next year, potentially leading the Federal Reserve to implement rate cuts to counter the economic headwinds.
Also Read | Fed meeting HIGHLIGHTS: 'Long way to go' on inflation, says Powell after FOMC holds rates for 2nd time
Sockin observed that despite the recent rate hikes, the US economy has shown impressive resilience. This endurance against higher interest rates has played a part in the Fed's careful stance on additional monetary policy changes.
Global economic outlook for 2024
Sockin predicts a deceleration in growth as the year begins. He expects this slower pace of expansion to continue into the first three quarters of 2024, indicating a possibly tough phase for the global economy.
Among emerging markets, Sockin identified India as an exception, voicing his belief that India is well-positioned to maintain its robust economic momentum despite wider global economic shifts.
For more details, watch the accompanying video
Also, catch all the live updates on markets with CNBC-TV18.com's blog
(Edited by : Shweta Mungre)
First Published:Nov 2, 2023 11:35 AM IST
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