December 13, 2022
Throughout the pandemic, there was little interest in Fed watching. The Federal Reserve took short-term rates down to zero and kept them there for two years. Now we are accustomed to the Fed raising short-term rates at each meeting for the past eight months. And while the markets believe the meeting this week will lead to another rate hike, this one could be interesting.
The past four meetings over the past six months have seen increases of 0.75%, which are very significant. Of course, the increase in inflation has been just as significant. Each time after the increase, the Fed’s statement has reiterated their determination to raise rates as much as it takes to bring inflation down to their target rate of 2.0%. In this week’s meeting, the Fed is likely to raise rates again. But there could be two differences.
For one, the markets are predicting an increase of .50%. This is still a significant increase, but it would break the string of 0.75% increases, which would lead some analysts to surmise that the Fed is starting to arrive at the end of the road. This does not mean that the Fed won’t continue to increase rates, but they should slow down as the end comes nearer. This leads to the second possible difference. Will the Fed indicate that they are beginning to slow down? Or will they keep up the strong anti-inflation rhetoric? Chairman’s Powell’s recent statement leans toward the latter. That is where it could get interesting — as up until now the Fed has been shouting war again inflation cries from the rooftops. Will the voices soften?
Source: Origination Pro