Fed May Delay Rate Hikes Until December, Fidelity Warns

Fidelity International's Global Head of Macro and Strategic Asset Allocation, Salman Ahmed, believes that the U.S. Federal Reserve may delay its rate-hiking cycle until December if inflation and labor market data remain strong.

The Fed held interest rates steady at 3.50%, 3.75% for the fifth consecutive meeting yesterday, in line with market expectations. The decision was made by a 9-to-3 vote, with three FOMC members dissenting in favor of a 25-basis-point rate hike.

The possibility of a September rate hike has not been ruled out, but markets have reduced their expectations following the meeting. The yield curve steepened as short-end yields declined and long-end bonds were sold off due to uncertainty surrounding inflation, fiscal policy, and the policy outlook.