Macro MATTers: Could the Fed hike rates in 2026?

Macro MATTers: A slightly weaker outlook, Fed on hold, Warsh’s hearing

Macro MATTers: Oil’s impact on the economy, markets, and the Fed

Kevin Warsh navigates a hawkish Fed shift

The desk posits that the changing tone from the Federal Reserve, now led by Kevin Warsh, signals a potential shift toward future rate hikes amidst growing economic momentum and inflationary pressures. As outlined in the source commentary, the Fed Chair seems disinclined to provide explicit forward guidance, which creates uncertainty in market pricing for rate adjustments. The consensus for rate hikes has intensified, with a 25bp increase already priced in for this year, as inflation rates are reported at a three-year high of 4.2%. Per the full note [source], this evolving landscape offers a complex, albeit hawkish, backdrop for major currency pairs like EUR/USD and USD/JPY going into the latter half of the year.

From the lame duck session to a new administration, how to think about rates, macro and the Fed ahead

The desk believes that the Federal Reserve is poised to implement another 25 basis point cut in December 2024, as outlined in MUFG's recent commentary on the macro landscape post-election. This anticipated move would complete a total of 100 basis points in cuts for the year, reflecting a dovish shift highlighted by the FOMC minutes that emphasize market functioning. Per the full note [source], the Fed's decision is likely influenced by the recent labor market trends, which show signs of deceleration, and the political context surrounding the election. The desk also anticipates further cuts in 2025, with a potential steepening of the interest rate curve as the market adjusts to the new administration's fiscal policies.