NatWest Markets has recently revised their forecast for the March meeting of the Federal Open Market Committee (FOMC), expecting a 50 basis point hike instead of the previously predicted 25 basis point rise. This change of prediction comes after the release of the Personal Consumption Expenditures (PCE) report, which provides an insight into the current state of the US economy.
Kevin Cummins, chief US economist for NatWest Markets, commented on the new prediction: “It’s true the PCE report is just one report and that January alone may not be enough to persuade all of the mainstream members of the FOMC to get back on board for a super-sized rate hike again, but given our expectation that the February data won’t necessarily rollover enough by the time of the March 22 meeting.”
The FOMC is the policy-making body of the Federal Reserve System and is responsible for setting key interest rates in the US. The FOMC meets eight times a year to assess the current state of the US economy and to make decisions on whether to change the interest rate. The interest rate is the rate at which banks borrow from the Federal Reserve, and it has a direct impact on the economy. A higher interest rate can lead to a decrease in economic growth, as it becomes more expensive for businesses and consumers to borrow money.
The PCE report provides an insight into the current state of the US economy, and is one of the key factors the FOMC considers when making decisions about the interest rate. The report is released monthly by the Bureau of Economic Analysis and shows the total spending by US households on goods and services. The report also includes data on prices, wages, and other economic indicators.
The PCE report for January showed that spending on goods and services decreased by 0.3%, while prices increased by 0.2%. This suggests that the US economy may be slowing down, which could lead to an increase in the interest rate.
NatWest Markets is now expecting the FOMC to opt for a 50 basis point hike at the March meeting. This would be the first time the FOMC has increased the interest rate by 50 basis points since December 2018.
The FOMC is also likely to take into account other key economic indicators when making their decision. These include data on unemployment, inflation, and GDP growth. If these indicators show that the US economy is slowing down, then the FOMC may opt for a larger rate hike.
Ultimately, the decision on whether to raise the interest rate will be made by the FOMC at the March meeting. NatWest Markets’ revised prediction for a 50 basis point hike suggests that the US economy may be slowing down, and that the FOMC may opt for a larger rate hike in order to stimulate economic growth. However, the FOMC will consider all available data before making their decision.