Bank of America economic analysts on their outlook for the Federal Open Market Committee (FOMC) and the implications for the US dollar.
- We retain our view that the Fed has one more policy rate hike in store and look for a 25bp rate hike at the September FOMC meeting for a terminal target range of 5.50-5.75%
- we retain our view that the first policy rate cut will come in May 2024
For the currency:
- Despite the USD's notable selloff earlier this month, we remain constructive in the short term, as broader economic resilience suggests that eventual rate cuts would likely occur later than currently priced, all else equal
- While we still see the dollar overvalued for the longer term, the fight against inflation in a relatively resilient economy should have USD supportive aspects
