How Many Hikes?
Yesterday, we discussed incoming interest rate hikes this year. Everybody wants to know—how much are interest rates going to be raised? Fed chair Jerome Powell has said Fed officials are prepared to hike rates in order to combat the worst inflation in four decades. However, he hasn’t given any precise details on the policy direction. What’s the reason for the lack of details? It could be that officials don’t want to disturb the economy and the markets as they prepare to raise interest rates.
Powell’s caution has opened the door for a lot of speculation. Many investors are betting on five interest rate hikes this year instead of the three predicted by Fed officials in December. And many Wall Street analysts are predicting as many as seven interest rate hikes. How many rate hikes do you think the US economy will experience this year?
After accepting that rising prices have not disappeared as predicted, officials have shifted their policy strategy to tightening. That “transitory” inflation turned out to not be so transitory after all. Consumer prices rose 6.8% last November, the highest level of inflation in roughly four decades.
The number of times the Fed will raise interest rates this year will depend on if inflation improves or gets worse. If inflation accelerates, it’s likely the Fed will be more aggressive with its tightening. Do you think inflation will accelerate or decelerate this year?
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.