At its September meeting, the U.S. Federal Reserve (Fed), as expected, left its federal funds target rate unchanged, at 5.25%–5.50%. The outlook remains hawkish, though, and the interest rate market currently is pricing a 30% probability of an additional 25-basis-point (bp; 100 bps equal 1.00%) hike at the Fed’s November meeting. Despite core inflation’s continued slowing, its current 4.3% year-over-year pace seems too high to us to expect interest rate cuts anytime soon.
