1/10/2024 0 Comments Fed next meeting![]() However, the second half of the year depends on how the economy fares, if it weakens, then the Fed could be cutting rates later in 2023. In 2023, the first half of the year is expected to see the Fed reach a point where it can hold rates steady. However, high rates are also disrupting the housing market. The Fed expects holding rates here to be effective in bringing down inflation, and we’re seeing some signs that that may be working in late 2022, based on softer inflation numbers. Rates at this level are viewed as restrictive for the economy. The Fed may hold rates within a 4% to 5% band for some time in 2023. However, this is viewed as a less likely scenario currently. However, some fear that prospects of a recession, will mean that the Fed may feel the need to cut rates later in 2023. This means that Fed may reach a point to hold rates steady around the spring. ![]() Smaller hikes at the February and March meetings are considered probable, based on interest rate futures. An increase in rates is expected at the Fed’s last meeting of 2022. The question is how soon, and at what level, the Fed stops hiking rates.ĭespite a move to a pause in rates, that may not occur rapidly. Should inflation data continue to ease, then it’s likely the Fed will cease hiking rates aggressively. ![]() The key question that is likely dominate early 2023 is how to handle a pause in interest rates. Of course, the Fed can set rates whenever it wishes, but we’ll only see rate decisions in these months if something more dramatic happens to the economy. In 2023, there won’t be any rate announcements in January, April, August and October. However, December’s meeting should continue the trend of a historically large move-up rate from the Fed for 2022.The Fed doesn’t set rates every month. However, softening inflation and rising unemployment may cause the Fed to soften its approach to interest rates as 2023 progresses. Hot inflation figures and a robust job market may encourage the Fed to move rates a little higher for longer in 2023. Upcoming data on unemployment and inflation will likely be just as informative in determining the path for interest rates in 2023 as the Fed’s statements. The Fed has made its near-term position reasonably clear and December’s rate decision should not be a surprise. For now, that’s an academic discussion, as recent economic data has suggested a recession isn’t imminent. In advance of the next Federal Open Market Committee (FOMC) meeting on May 3-4, 2022, the markets are anticipating that it will decide to increase the federal funds rate by 50 basis points (bp. recession in 2023 encourages the Fed to soften its approach on interest rates. It remains to be seen if the prospect of a U.S. In part, the Fed has been able to raise rates aggressively because the U.S. ![]() Markets currently expect the Fed Funds rate to hold at around 5% for much of 2023. As 2023 approaches, the market will look for some clues as to how the Fed is thinking about the duration of peak interest rates. The Fed has also signaled that once interest rates reach their target level, it will hold them there for some time. If there’s another encouraging inflation report, then the Fed may not move rates as high as 5% in 2023, but if November’s numbers for the October rate of inflation were a temporary reduction, then the Fed may move more aggressively in early 2023. Currently the Fed has suggested that the encouraging inflation numbers as reported in November could have been a one-off, and there’s potentially a lot more work to do before inflation returns to the Fed’s 2% goal.ĭecember’s figures will help inform the trend of U.S.
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