Groupama AM sees Fed funds target rising to 4.25%-4.5% as neutral rate estimate climbs
TLT•Groupama AM sees higher Fed funds target
Groupama AM flagged a shift in Fed thinking toward a higher neutral policy rate, following a 25-bp hike to a 3.75%-4% Fed Funds range.
Further tightening is seen as likely, with the median dot for the equilibrium Fed Funds rate raised to 3.25% from 3.06% in June.
Scenario could shift if conditions change
The scenario could shift if financial conditions tighten further or if changes in inflation methodology show a sharper disinflation trend.
Base case calls for another hike by year-end
Groupama AM's base case calls for another hike by year-end, with 16 of 18 policymakers projecting additional tightening.
The firm set a 4.25%-4.5% target range for Fed Funds, citing resilient growth, productivity gains and inflation risks tied to commodities.
