Fed Hits Pause Button On Rate Hikes Offered by Rob Taylor Jerome Powell skipped an interest rate hike at the Fed’s June meeting, but the market isn’t buying what the Fed Chair is selling about what’s next with short-term rates. Powell signaled that two more rate increases may still be in store for later this year and indicated that “we’re talking about a couple of years out” before the Fed might cut rates.1 But that’s not what market participants anticipate. As you can see in the accompanying chart, most see one more rate increase later this year, and the consensus sees rates trending lower as early as December 2023.2
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To Powell’s credit, he said the Fed hasn’t yet decided on July’s policy, which means all eyes will closely watch economic reports such as the Consumer Price Index (CPI). As you can see in the other chart, next month the whopping 1.2% increase from June 2022 will be dropped from the 12-month rate.3 The Cleveland Fed, which published the widely followed Inflation Nowcasting tool, is forecasting a 3.22% annual rate for CPI in June 2023. That’s getting close to the Fed’s long-term inflation target of 2.0%. |
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But I can understand why Fed Chair Powell is conservative with his interest rate outlook. He was the same person who tried to convince the markets that “inflation was transitory” in early 2021. He doesn’t want his legacy as Fed Chair to be that he underestimated inflation – twice! Navigating monetary policy in recent years has been extremely challenging. But I expect the Fed will be happy to report upbeat news in the months ahead if warranted. |
1. CNBC.com, June 14, 2023. “Fed Recap; Breaking down the market’s reaction to the Fed’s pause and all of Powell’s key comments." DISCLAIMER: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of Global View Capital Advisors. LTD (GVCA) or any of its affiliates. The content is developed from sources believed to be providing accurate information. The information in this material is not intended as tax or legal advice. Please consult legal or tax professionals for specific information regarding your individual situation. This material was developed and produced by FMG Suite to provide information on a topic that may be of interest. FMG Suite, LLC, is not affiliated with the named representative, broker-dealer, state- or SEC-registered investment advisory firm. The opinions expressed and material provided are for general information and should not be considered a solicitation for the purchase or sale of any security. |
Fed Hits Pause Button On Rate Hikes
