Highlights:

• At yesterday’s meeting, the Fed left the door open to a further raise in December or Q1, but the overall tone of the statement and press conference strengthened the conviction that the bank is done hiking. The press release and the Q&A underlined the role of tighter financial conditions in taming demand. Paradoxically the drop in bond yield following the meeting, if protracted, could lead to looser financial conditions and another rate rise.
• The FOMC has also become more concerned about the risk of overtightening, despite the very strong Q3 GDP figures and solid employment growth. The much weaker than anticipated manufacturing ISM is a reminder that higher rates and a complicated global outlook are set to weigh on the economy.
• We continue to predict a marked growth slowdown into 2024. We still see June as the likely beginning of rate cuts, but resilient activity and sticky inflation may force the Fed to maintain the policy rate at the current level into H2.    
   

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