Fed expected to hold steady next week

A strategist at Morgan Stanley said in a report that recent data indicate the Fed will stay put at its July meeting, and that it may keep rates unchanged for the rest of this year. They wrote: “The Fed is losing patience with inflation above target. The inflation trajectory in the coming months is crucial—we expect inflation to ease as anticipated—otherwise the Fed may turn to rate hikes later this year.” The current money markets have already priced in nearly two rate hikes by the end of the year. However, the trend of easing inflation could lead the Fed to keep rates unchanged this year, keeping the federal funds rate in the 3.50% to 3.75% range. “We expect the downward inflation trend to keep the Fed on hold this year.”