The Federal Reserve will likely keep its interest rate steady at its September meeting while raising it in November, Bank of America economists say.
That might mean alleviated pressure for the risk markets next month, but increased volatility in November, Howard Du, FX Strategist at BofA, wrote in a Wednesday note.
Compared with the S&P 500’s average performance in September during Fed rate hiking cycles, the index saw a smaller decline when the U.S. central bank kept its interest rate steady for the month, based on data since 1990, Du noted.
Bank of America
However, the S&P 500 posted a negative average return in November, in years when the Fed raised its policy rate that month after holding it steady in September during hiking cycles.
Traders are pricing in an 88.5% chance that the Fed will keep its interest rate unchanged in its meeting next month, and a 35% chance the central bank will raise the rate by 25 basis points, according to CME FedWatch.
U.S. stocks traded mixed on Wednesday, with the Dow Jones Industrial Average
DJIA
up less than 0.1%, the S&P 500
SPX
down 0.1% and the Nasdaq Composite
COMP
down 0.4%. The yield on the 10-year Treasury rose 2.8 basis points to 4.246%, according to Dow Jones market data.
Read: Fed has ‘more work to do’ to get inflation back down, Daly says
Also read: Fed’s Kashkari says he’s not ready to say Fed’s done with rate hikes
This story originally appeared on Marketwatch
