Yujin Securities "September FOMC Likely to Hold Rates Steady"

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Yujin Investment & Securities stated that the Federal Open Market Committee (FOMC) meeting in September is "likely to maintain the policy rate momentum."

On the 4th, Lee Jung-hoon, a researcher at Yujin Investment & Securities, explained, "Although the Federal Reserve (Fed) is expected to postpone the timing of additional rate hikes to November to maintain a hawkish stance, it is highly likely that the actual rate hikes have already ended."

The basis for this is the Personal Consumption Expenditures (PCE) inflation and employment reports released last week. The core PCE price index for July rose by only 0.2% month-on-month. The non-residential services prices, which the Fed pays close attention to, increased by 0.5% last month, up from 0.3% in June, but this appears to be a temporary effect. This was largely due to a temporary 1.6% surge in prices in the finance and insurance sectors. Other underlying inflation pressures, represented by trimmed mean and median inflation measures, continued to show a slowing trend.

Lee predicted, "At the September FOMC, the Fed will likely raise its growth forecast and lower the core PCE inflation forecast again." Personal consumption was robust in July, and the Atlanta Fed's third-quarter growth forecast of +5.6% is too high.

Lee analyzed, "The Fed is somewhat aware of temporary factors such as Taylor Swift's concert and the 'Babenheimer' effect (the combined impact of the movies 'Barbie' and 'Oppenheimer'), and recent employment and inflation indicators have not been strong enough to justify two consecutive rate hikes."

He added, "The Fed will maintain a hawkish stance by postponing the decision on additional hikes to the November FOMC, but it is still highly likely that the rate hikes have already ended."

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