Federal Open Market Committee – July 24, 2023

The Federal Reserve is holding its July meeting this week, and the Fed’s Federal Open Market Committee (FOMC) is widely expected to impose another 25-basis-point increase in the federal funds rate, putting it in a range of 5.25% to 5.5%. 

How wide is this expectation? As of this past Friday afternoon, the closely watched CME FedWatch Tool indicated a 99.8% probability of a 25-bp rate hike. A couple of days earlier, Reuters reported that all 106 economists it polled think the increase is going to happen. 

However, a majority of those economists believe this will be the last increase of the current tightening cycle. Just 19 of the 106 economists believe the overnight interest rate will peak at 5.5% to 5.75%, notwithstanding the consensus of the FOMC’s most recent “dot plot” of rate increases. 

A similar sentiment came from Jan Hatzius, chief economist at Goldman Sachs, who also revised downward the odds of a U.S. recession in the next 12 months. 

“The main reason for our cut is that the recent data have reinforced our confidence that bringing inflation down to an acceptable level will not require a recession,” he told CNBC. 

Hatzius cited resilient U.S. economic activity, saying second-quarter GDP growth was tracking at 2.3%. The rebound in consumer sentiment and unemployment levels falling to 3.6% in June also added to Goldman’s optimism. 

Furthermore, inflation is on the wane, with the headline consumer price index (CPI) measure slowing to 3.0% in June from 4.0% in May. However, there’s a debate on Wall Street over whether more rate increases might be needed to ensure “disinflation“ continues or if doing more could cause unnecessary damage to the economy, reported Reuters. 

“For the Fed, despite the soft CPI print, we still anticipate a hike in July … (and) while we hope the softness in inflation persists, it is unwise from a policymaking standpoint to bank on that,” Jan Nevruzi, U.S. rates strategist at NatWest Markets, told Reuters. “We do not want to rush ahead and say the fight against inflation has been won, as we have seen head-fakes in the past.” 

Indeed, BMO Capital Markets’ Doug Porter said, “the real battle begins now, as the easy base effects are behind us.” He pointed out that the reason inflation fell so dramatically in June is that it was so elevated at this time last year.

Connect CRE’s sister website, Connect Money, will have the news about the FOMC’s July 26 decision as it happens. As for the longer-term outlook, we’ll just have to wait and watch.


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About Paul Bubny

Paul Bubny serves as Senior Content Director for Connect Commercial Real Estate, a role to which he brings 13-plus years’ experience covering the commercial real estate industry and 30-plus years in business-to-business journalism. In this capacity, he oversees daily operations while also reporting on both local/regional markets and national trends, covering individual transactions across all property types, as well as delving into broader subject matter. He produces 15-20 daily news stories per day and works with the Connect team and clients to develop longer-form content, ranging from Q&As to thought-leadership pieces. Prior to joining Connect, Paul was Managing Editor for both Real Estate Forum and GlobeSt.com at American Lawyer Media, where he oversaw operations at both publications while also producing daily news and feature-length articles. His tenure in B2B publishing stretches back into the print era, and he has served as Editor in Chief on four national trade publications. Since 1999, Paul has volunteered as the newsletter editor of passenger rail advocacy groups (one national, one local).