Fed rate hike bets may be running too hot, a TD economist warns
“We don’t think it’s going to have to hike nearly as much as what the market is pricing in.”
The Federal Open Market Committee voted 12-0 on September 16 to lift the federal funds rate by 25 basis points to a range of 3.75% to 4%. It was the central bank’s first increase since 2023. Burleton expects the next move at the October 27-28 meeting.
“We don’t see the Fed raising rates by as much either. We have one more hike, which is very consensus. The Fed will raise rates again in October, just a few days before the midterms, which is unusual. But by then, we do see, as long as inflation continues to ease, we don’t see a lot of further increases,” he said.
Why the Fed rate hike cycle may be shorter than expected
Burleton described the current tightening as a recalibration rather than a new campaign.
“So the bottom line is, this is not a typical tightening cycle where it’s up and up and up and up. This is more of a taking back some of the cuts last year. This is more fine-tuning. And again, we’re not alone in this view,” he said.
