Here’s What Investors Need to Know Ahead of the Final Fed Meeting of 2022
When the economic landscape is healthy and businesses are doing well, one rarely hears news from the Federal Reserve.
As the arbiter of the Federal Funds Rate, the Federal Reserve usually appears in the news when it changes interest rates, which the U.S. central bank is expected to do again in the final meeting of 2022.
2022 has been one of the busiest years on record for the Fed, with no less than six interest rate raises in the year, each with its own preceding meeting among Federal Reserve officials.
There is still another Federal Reserve meeting in 2022 scheduled for December 13th. Notes from previous meetings indicate that the Fed will continue to raise rates until inflation comes down to more manageable levels; recent CPI data suggests that prices are still over 7% higher than last year, leading many to believe that yet another raise is coming.
Based on inflation falling below 8%, expectations are that the rise could be 50 basis points, a reduction from the repeated 75 basis point raises we saw throughout 2022. A 50-point rise would put the Federal Funds Rate at 4.25%, its highest level since December 2007.
Furthering the belief that the raises will begin to come down stemmed from Federal Reserve Chair Jerome Powell’s comments during a speech last week, where Powell stated:
“Monetary policy affects the economy and inflation with uncertain lags, and the full effects of our rapid tightening so far are yet to be felt. Thus, it makes sense to moderate the pace of our rate increases as we approach the level of restraint that will be sufficient to bring inflation down. The time for moderating the pace of rate increases may come as soon as the December meeting.”
However, while the rate of the increases should begin to slow, the increases are expected to continue past whatever raise, if any, is announced at the coming meeting. Many large banks expect the Federal Funds Rate to eventually eclipse 5% and maybe go as high as 5.25%, a potential 150-point rise from current levels.
Such an increase could finally push the economy into the recession that many fear. Investors should continue to focus on value-oriented stocks until the economic landscape is more favorable for growth companies to resume their upward trajectory.
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