Fed keeps door open for further rate hike – Commerzbank

Analysts from Commerzbank Research are out with a note highlighting that the Federal Reserve's (Fed) rate hold on Wednesday sees the Fed unsure if their policy measures will be enough to control inflation moving forward.

Fed keeps key rates unchanged

The Fed left its key interest rates unchanged today, with the target range for fed funds remaining at 5.25%-5.50%. This is the second meeting in a row that the Fed has refrained from raising rates. The last rate hike to date was a 25 bp step in July... Today's decision was unanimous.

Fed Chairman Powell again conceded in the post-meeting press conference that the economy was surprisingly robust. If there is further evidence of high economic growth, or if the labor market picks up significantly, more rate hikes may be needed.

Overall, the Fed sees progress on inflation and believes labor market imbalances are gradually continuing to diminish.

However, he said, it was not yet clear whether financial conditions were already sufficiently restrictive to achieve the Fed's goals. Powell, when asked, indicated that the Fed therefore still has a bias toward further rate hikes.

Overall, we think it is more likely that interest rates will not be raised further. This is because the central bank has been very cautious in recent weeks, despite some surprisingly strong data. We also expect growth to slow significantly in the fourth quarter. Indications of this should be available by the next meeting on December 12/13. Among other things, two inflation and two employment reports will still be published.