The U.S. Federal Reserve (Fed) has upcoming rate decisions on February 1, March 22 and May 3. Despite the Fed’s conviction that inflation remains a major concern, the markets are less convinced that many more hikes are coming based on recent inflation reports showing inflation easing. Markets suspect that the Fed will soon be done raising rates, perhaps as soon as by the May 3 rate decision.
In December 2022, the Fed indicated that rates are likely to exceed 5% in 2023, but the markets don’t see it. The markets believe we’ll most likely see a 0.25 percentage point hike at both of the February and March meetings, but that could be the end of hikes for this interest rate cycle. In fact, the Fed may even cut rates in November or December of 2023, based on interest rate futures. Ironically, that’s something the Fed explicitly said at their last meeting they won’t do.
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