Forex Field Guide for US Dollar (SEP 2022 Fed Funds update)

Reference guide covering Fundamental, Sentiment and Technical factors of the US economy

FUNDAMENTAL SUMMARY

-FEDERAL FUNDS RATE-

The rate was set on September 21st to between 3.00 and 3.25 percent after an expected 75 bps hike. Fed chair Powell had previously said that 2.25-2.50 was the neutral rate and so this is now intended to tighten the economy, ie. slow the rate of inflation by slowing the rate of growth through more expensive borrowing.

The outlook for interest rates is hawkish as next year in 2023, the FOMC projects 4.6 percent while Trading Economics forecast4.75 percent.

The next FOMC meeting is on Wednesday the 2nd of November.

-GROSS DOMESTIC PRODUCT GROWTH RATE (GDP)-

The second estimate for Q2 over Q1 printed on August 25th showed a contraction of 0.6 percent which is 0.2 percent higher than expected, 0.3 percent higher than the Advance estimate and 1.0 percent higher than Q1 over Q4 (-1.6). Two quarters of negative growth is a technical recession.

The outlook for GDP is optimistic as Trading Economics forecast 2.80 percent annualised expansion this quarter (Q3) while the FOMC projects a 1.70 percent annualised expansion next year (2023).

The GDP second estimate report will be available on Thursday September 28th.

-CONSUMER PRICE INDEX RATE (CPI)-

The August rate printed on September 13th showed 8.3 percent inflation which is 0.2 percent higher than expected and 0.2 percent lower than July (8.5). The largest contributor continues to be energy which inflated 23.8 percent although this has fallen significantly since last month’s 32.9 and 41.6 previous to that.

The outlook for CPI is slightly optimistic as Trading Economics had forecasted it to be at 8.50 percent this quarter (Q3) but falling to 1.90 percent next year.

The September CPI report will be available on Tuesday October 13th.

-PERSONAL CONSUMPTION EXPENDITURES RATE (PCE)-

The twelve months to July rate that printed on August 26th showed 6.3 percent inflation which is 0.5 percent lower than expected and 0.5 percent lower than the twelve months to June report (6.8). The largest contributor continues to be energy which inflated 34.4 percent.