"The Fed said yesterday that there was no reason to be worried about economic prospects. Even if growth has slowed down earlier this year, it has been on the upswing lately. The slowdown was mainly attributable to the increase in energy price, which is likely to have no further impact on growth or on inflation", says Alexandra Estiot, economist at BNP Paribas. The Fed went against the expectation of some market analysts who had betted on a shorter cycle than expected. "Even after this hike, our monetary policy remains accommodating and linked to a robust productivity growth, and seeks to promote economic growth", sustained the Fed in a release after the FOMC meeting.

On the other hand, the Fed said once again that the increase in energy price was unlikely to lead to renewed inflation. This interpretation is likely to be welcome by the bond market, but yields, which are already low, are unlikely to be dragged down at a lower level. This rise will probably be the last before the presidential elections take place on 2nd November. What will follow suit remains uncertain and depends to a certain extent on the evolution of the growth level of the American economy and the fluctation of oil price.

Even if some analysts bank on an improvement in the short run, others are still foreseeing that the current troubled period could last for a while. Subsequently, there are still a majority of them to forecast a tightening of the monetary policy on the FOMC's next meeting on November 10th. "We think that the decision of the Fed is compatible with a new quarter point hike in November and nobody would be surprised to see the Fed fund level at 2% at year end", concludes Paul Donovan. On its part, Alexandra Estiot at BNP Paribas believes the Fed will adopt a more agressive stance pushing its rates at 2.25% by December.

F.P.