Big Hike
The last Fed meeting resulted in officials agreeing to raise interest rates by 0.75% for the second time in a row, and people believed that there would be chances that rate increases would slow from then on. Fast forward to the present day, and sentiment isn’t the same anymore.
There hasn’t been enough economic data and evidence to justify slowing rate increases, and investors are starting to realize that as we get closer to the September meeting. Markets have been expecting a 0.75% rate increase, and the Federal Reserve has done nothing to sway investor sentiment there. At Jackson Hole, they continued to push the narrative of boosting interest rates until inflation is no longer a problem, and this has been confirmed by other Fed officials. Economists believe that chair Jerome Powell’s aggressive tone towards the inflation crisis suggests a large rate hike, and if this is true, this would make it the third consecutive hike at this degree, which is something we haven’t seen in a long time. Officials are having to weigh the risks of fighting inflation versus hurting the economy, and they’re focused on tackling the inflation problem first as that is a prerequisite for the latter.
The decision will likely vary depending on where officials want rates to be in a long-term view. For some, they want rates to be at 4 percent by the end of the year, while others have their desires above and below that. One of the major points of the economy that provides justification for the Fed’s viewpoint is the labor market, which has continued to show signs of strength despite rate increases. Along with inflation, a cooldown in jobs will be one of the indicators officials will be looking for to slow their rate increases.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
