The Impact of The 0.25 Interest Rate Point Hike – LIVE
Most Economists Surveyed by Reuters Stated That a 25 basis Points Hike Was no Surprise. Watch FED Chair Jerome Speak Live After The Rate Hike Decision Now:
The Federal Reserve’s interest rate decision has been widely anticipated, with the market predicting a near-certain quarter percentage point increase. This marks the 10th hike since March 2022, bringing the benchmark borrowing rate to a target range of 5%-5.25%. However, the real challenge for investors is determining the Fed’s next steps: will it pause rate hikes, or continue tightening if needed to combat inflation? The FED delivering a smaller rate hike, flags possible pause in tightening cycle.
Collin Martin, a fixed income strategist at Charles Schwab, emphasizes the importance of the Fed’s messaging regarding a potential pause. Balancing the need for a pause with the possibility of further hikes in response to inflation will be crucial. Multiple factors, including persistent soaring inflation and the recent banking crisis, will influence the Fed’s future monetary policy.
Despite some indicators suggesting a slight easing of inflation, rates remain well above the Fed’s 2% target. The economy is also showing signs of an approaching recession, with weak GDP growth and cracks in the labour market which we touched on here in our most recent WealthyVC article. These factors could lead the Fed to signal a policy shift, according to Goldman Sachs. They predict the Fed will pause in June but retain a hawkish bias, acknowledging the need for restrictive interest rates while also recognizing other economic stresses.
Persistently high prices could sway the Fed’s stance. Inflation has been more stubborn than anticipated, and recent data has not shown significant progress in controlling it. As a result, Citigroup predicts additional rate hikes in June and July before the Fed finally steps back. This Fed meeting unravelling currently is critical, as it may reveal differing opinions among officials regarding the balance between combating inflation and adjusting policy.
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