Will this be the last rate hike, or can we expect more?
The Federal Reserve has again raised interest rates, reaching their highest level over 22 years. This recent hike of a quarter point was widely anticipated and follows a brief pause in the Fed’s campaign to increase rates. Despite this move, the question remains whether this will be the last of the rate hikes or if we can expect more in the future.
Federal Reserve Chairman Powell indicated that multiple economic factors, such as the Consumer Price Index and the unemployment rate, might influence further rate decisions. He also stated that another rate hike could occur in September, depending on these indicators. But reiterated, “We are strongly committed to bringing inflation back to our 2% goal.” This comes as the Fed strives towards its dual goals of price stability and maximum sustainable employment while trying to avoid pushing the economy into a recession.
Economists’ recent shift in opinion suggests that a recession may be unlikely. According to a survey by the National Association for Business Economics, 71% of economists believe the probability of a recession occurring in the next 12 months is 50% or less. This marks a significant change from earlier predictions made in April, where the majority were forecasting a recession.
Looking at historical trends, equities have generally performed well when the Fed stops hiking rates. For example, median returns of the S&P 500 for the 3-, 12-, and 30-months post-pause were +7.7%, +19.1%, and +62%, respectively. However, it’s important to remember that past performance does not guarantee future results.
In summary, while it remains uncertain whether the Fed’s recent interest rate hike will be the last, most economists are now predicting a softer economic landing than previously anticipated. Monitoring these developments closely will be crucial in the coming months.
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 BusinessInsider.com, July 25, 2023
 Bloomberg.com, June 18, 2023
 FoxBusiness.com, June 14, 2023
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