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Federal Reserve to raise interest rates another 75 basis points



For now, the final rate is expected to be 3.8% in 2023, but given current inflation and its treatment, the Fed will have to adjust these figures as well.

The U.S. Federal Reserve’s Federal Open Market Committee (FOMC) is about to conclude its two-day meeting and the world is expectant to see how much it will raise interest rates. The consensus forecast is that economists expect a 75% hike, which, if achieved, would represent the Fed’s third interest rate hike.

The economy is at a turning point as inflation has remained very high. The Fed sees raising interest rates as one of its bold attempts to curb inflationary growth, and it is willing to do so at all costs. Based on its determination, some analysts are even predicting that the Fed could announce a larger than expected interest rate hike, which could be as much as 100 basis points.

Following the FOMC meeting, Fed Chairman Jerome Powell is expected to deliver a speech . The speech is expected to detail plans to continually raise interest rates until inflation returns to the expected range of less than 4%, up from the current 8.3% in August.

I think he’s putting a bulletin board behind him that says “inflation must come down.“, said Rick RiederBlackRock’s chief investment officer for global fixed income. “I think he’s going to talk tough.”

In a surprising move, futures linked to the S&P 500 were up 0.23%, while those linked to the Nasdaq 100 and Dow Jones Industrial Average were up 0.10% and 0.6%, respectively.

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The potential interest rate hike will be of great importance to the broader financial ecosystem and will undoubtedly determine the pace of recovery for most stocks in the U.S. economy. The Fed must have taken all possibilities into account and any rate hike that is announced should contribute to achieving all of its intended objectives.

Fed to raise interest rates and the final rate.

The Federal Reserve is not just announcing an interest rate hike, as there are other key forecasts to be released. One of these forecasts is the “final rate“This represents the level at which interest rates will peak before the Federal Reserve stops its aggressive rate hikes.

For now, the terminal rate is expected to be 3.8% in 2023, but given current inflation and its treatment, the Fed will have to adjust these numbers as well.

Economists at Citigroup Inc expect the terminal rate to reach 5%, while Goldman Sachs analysts believe it will be between 4% and 4.25% by the end of the year. The strategists expect the rate to rise from a high of 4.25% to 4.5% by 2023. If these estimates materialize, they expect one decline in 2024 and two more in 2025.

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