According to Morgan Stanley, the Fed will Make a Hawkish Raise in July, Strengthening the US Dollar.

Prior to Wednesday's FOMC July policy decision, economists at Morgan Stanley Research provide their predictions for the US currency.

July 27, 2022 - 12:03 PM 248 views

According to Morgan Stanley, the Fed will Make a Hawkish Raise in July, Strengthening the US Dollar.

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© According to Morgan Stanley, the Fed will Make a Hawkish Raise in July, Strengthening the US Dollar.

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Prior to Wednesday's FOMC July policy decision, economists at Morgan Stanley Research provide their predictions for the US currency.

Key Quotes

"Our economics research colleagues anticipate a 7513p rate increase from the FOMC, which is in line with the 78bp implied by swap pricing. We believe the risk is that the market begins to price in further Fed tightening throughout the upcoming quarters given that the equivalent of less than six 25bp rises is already factored in for the next year.

"The Federal Reserve might describe its rate hike in July in more hawkish terms, which would lower the cost of risky assets and raise the USD generally. On the other hand, we believe that the outlook for the world favours keeping long USD positions. Sell-side projections for US growth in 2022 have significantly decreased, coming in at levels close to our own estimations. However, it's possible that growth projections elsewhere in the world may continue to fall.

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