Bar for Fed to Hold is High, May Spark More Dissent

Dow Jones
4 hours ago

0448 GMT - The bar for a rate "hold" by the Fed is high and would certainly lead to more dissent than at the July meeting, says Christian Scherrmann, DWS Chief U.S. Economist. He reckons a Fed rate hike would not be a surprise, but also sees a scenario in which it doesn't happen. While a hike would likely pay off in terms of credibility and managing inflation expectations, with no forward guidance, markets could anticipate a more prolonged tightening cycle. Meanwhile, a Fed rate hold could further increase yields as markets adjust to inflation expectations. "The likely middle ground would be a hawkish hold or a dovish hike," he says. Either option would require precise communication to be successful. "This would certainly be risky for a Fed chair who likes to keep his cards close to the chest."

 

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