In line with market expectations, the Federal Reserve (Fed) voted unanimously to raise the fed funds rate by 25bps to 4.5-4.75% last week. In its statement, the committee noted that inflation pressures had eased (although remained elevated), but still thought ongoing increases in the fed funds rate were appropriate. Importantly though, Chair Powell did not push back against market pricing for the path of the fed funds rate, which sees approximately one more 25bp hike, a pause, and then cuts later this year and in 2024. Stocks responded positively to this lack of push back, with US markets closing at their highest level since summer 2022.

The market expects cuts from the Fed

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