"Experts label the Federal interest rate increase as 'Sky Command'"
Here's the refresh on that interest rate hike announcement by the Fed and what it means for investors, based on expert insights:
Yep, the Fed raised rates again, this time by a significant 75 basis points. Jerome Powell, the Fed chair, announced that the central bank's aim is to bring inflation back down to their 2% target. This puts the federal funds rate in a range of 3.75% to 4%. Powell confirmed that more increases may be on the horizon, but how many and how much remains to be seen.
So, what's the skinny on this rate hike for investors? Here's what some experts had to say:
Gurpreet Gill, macro strategist at Goldman Sachs Asset Management, predicts that the Fed could scale back the pace of rate hikes at the December meeting, possibly lowering them to 0.5% per meeting. However, an impressively robust labor market and persistent high inflation could keep the rate hikes going into 2023, just in smaller doses.
Steve Chiavarone, senior portfolio manager at Federated Hermes, thinks the Fed is playing a risky game. He suspects that the magnitude of future rate hikes will decrease, but the "terminal rate"—the ultimate peak before the interest rate starts to come down—will likely be higher than currently anticipated, resulting in a series of smaller hikes rather than a sudden easing of monetary policy.
Andrzej Skiba, head of US fixed income at RBC Global Asset Management, considers this rate hike a hint that the Fed isn't done yet, but it might not be the next jumbo hike. Skiba expects a potential 50 basis point hike next, but the Fed may surprise the market with larger increases in the future to nail the inflation target.
Brian Mulberry, client portfolio manager at Zacks Investment Management, argues that smaller rate hikes are still hikes, and investors shouldn't read too much into Powell's recent language concerning a change in tightening policy or a reduction in the pace of future increases. Mulberry insists that interest rates will still need to rise higher than initially expected, despite any shifts in the Fed's approach.
Eric Winograd, lead US economist at AllianceBernstein, asserts that the Fed's goal is to slow the pace of rate hikes, citing the time it takes for monetary policy changes to impact inflation and the economy. Winograd suggests that the Fed will now consider not only the data and market conditions but also the cumulative impact of their past actions before making future decisions.
Bill Adams, Chief Economist at Comerica Bank, believes that the risk of further energy price increases this winter could prompt the Fed to extend its rate hike path. However, he emphasizes that the Fed would want reassurance that inflation is easing before hitting the brakes.
Keep an eye on these experts' predictions as we navigate the uncertain economic landscape together! Remember, this is just the tip of the iceberg when it comes to understanding what the Fed's latest moves mean for your investments. Stay tuned for more insights, and always reach out if you need help! 💼📈💰
Enrichment Insights:- The Fed's outlook has evolved significantly since the September 2022 rate hike, with experts predicting both rate hikes and potential cuts in the future.- Current economic conditions and fears of an economic downturn have led the Fed to a "wait and see" mode, keeping interest rates high to combat inflation while remaining cautious.- Some experts report high probabilities of interest rate cuts happening by the end of 2025, with the earliest cut happening around June, depending on factors such as market volatility, inflation, and employment rates.
- Jerome Powell, the Fed chair, aims to bring inflation down to the 2% target, possibly leading to more interest rate increases in the future.
- Gurpreet Gill predicts that the Fed could scale back the pace of rate hikes at the December meeting, offering a glimmer of hope for investors.
- Steve Chiavarone suspects that the Fed may have a higher "terminal rate" than currently anticipated, suggesting smaller hikes rather than a sudden easing of monetary policy.
- Brian Mulberry insists that interest rates will still need to rise higher than initially expected, despite any shifts in the Fed's approach, emphasizing that smaller hikes are still hikes.
