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FOMC more positive about consumer spending - NBF

The Fed left the interest rate range unchanged at 1.75-2.00%. According to National Bank of Canada’s analysts, Paul-André Pinsonnault and Krishen Rangasamy, the Fed remains on course to raise interest rates in September.

Key Quotes:

“The Fed also says both headline and core inflation “remain near 2%”, a more confident statement compared to June’s depiction of “have moved close to 2%”.”

“The decision to leave rates unchanged was unanimous within the FOMC.”

“The Fed’s statement did nothing to change market expectations of the path of interest rate hikes this year. Yet, the FOMC is now more positive about consumer spending (which accounts for 70% of the economy) and also sounded slightly more comfortable about inflation.”

“There are indeed signs of mounting cost pressures (e.g. employment cost index) and the Fed may want to nip inflation in the bud before it intensifies. Moreover, thanks to revisions, U.S. real GDP growth this year (Q4/Q4) is on track to top even the most optimistic forecast in the Fed’s last summary of economic projections.”

“The Fed remains on course to raise interest rates in September, a meeting that will coincide with the release of new economic projections.”

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