News Digest:

Strong growth rates in the United States coupled with sticky inflation numbers have raised concerns over the expected rate cuts from the Federal Reserve. In fact, some analysts even believe that the borrowing costs could go up to 6.5% in 2025.

According to Bloomberg, stronger-than-expected inflation data preceded the growth numbers of US retail sales – both topping earlier estimates. This has resulted in concerns over the number of rate cuts, which varied from at least two to as many as fine. Now, some analysts fear that if inflation persists around 2.5% the Fed might actually hike rates.

Already, the markets have scaled back their bets on the timing of the monetary policy easing in the wake of robust economic growth in the United States. Even banks are taking note of these developments and adjusting their policies around the benchmark Fed rates which have risen to their highest levels of 5.5% since the 1980s.

The market has also tempered earlier views of the rates being slashed by a whopping 275 basis points to a more sober range of between 50 and 100 basis points.

End Notes

Source: https://www.bloomberg.com/news/articles/2024-04-15/fed-hiking-rates-to-6-5-is-real-risk-for-ubs-strategists