The US Federal Reserve will end its tightening cycle after a 25-basis-point hike at each of its next two policy meetings and then likely hold interest rates steady for at least the rest of the year, according to most economists in a Reuters poll.

Fed officials broadly agree the US central bank should slow the pace of tightening to assess the impact of the rate hikes. The Fed raised its benchmark overnight interest rate by 425 basis points last year, with the bulk of the tightening coming in 75- and 50-basis-point moves.

As inflation continues to decline, more than 80% of forecasters in the latest Reuters poll, 68 of 83, predicted the Fed would downshift to a 25-basis-point hike at its Jan. 31-Feb 1 meeting. If realized, that would take the policy rate - the federal funds rate - to the 4.50%-4.75% range. (RTRS - Continue Reading) 

The standoff over the US government's borrowing limit is unlikely for now to crimp the Federal Reserve's plans for higher interest rates and to shrink its massive balance sheet, but it could force tough choices the longer the impasse drags on.

On Thursday, the US government hit the $31.4 trillion debt ceiling set by Congress, and the Treasury Department began manoeuvres allowing it to keep funding the government until early June without breaching the cap.

The political showdown between congressional Republicans and the Biden White House comes as the Fed aims to shed just under $100 billion a month from its $8.5 trillion balance sheet, and officials are eying lifting their benchmark interest rate above 5% in the months ahead to bring down inflation. (RTRS - Continue Reading) 

UK employers unleashed a hiring spree at the start of 2023 even as consumer confidence about the economy stalled, two separate surveys showed.

There were more than 184,000 new job advertisements in the first week of January, up by a quarter on the same period a year ago, according to the Recruitment & Employment Confederation. The market research firm GfK said its measure of consumer sentiment fell 3 points to minus 45 in January, the first decline in four months.

The figures point to strength in the economy despite a cost-of-living crisis that’s likely to push the UK into a long, shallow recession this year. (BBG - Continue Reading)