Federal Reserve Board Chairman Jerome Powell holds a news conference following the announcement that the Federal Reserve raised interest rates by half a percentage point, at the Federal Reserve Building in Washington, U.S., December 14, 2022.
Evelyn Hockstein | Reuters
The Federal Reserve is expected to raise interest rates by just a quarter point but also likely signal it will stay vigilant in its fight against inflation even as it reduces the size of the hikes.
The Fed releases its latest rate decision Wednesday at 2 p.m. ET, and Fed Chair Jerome Powell briefs the media at 2:30 p.m. The expected quarter-point hike follows a half percentage point increase in December, and would be the smallest increase in the federal funds target rate range since the first hike of the cycle last March.
While the meeting is expected to be relatively uneventful, strategists say it could be a challenge for the Fed chief to temper the reaction in financial markets. The markets have been rising as investors expect the central bank might succeed in a soft landing for the economy while also snuffing out inflation sufficiently to move back to easing policy.
“How is he going to tell people to calm down, chill out and don’t get so excited by us getting close to the end of the interest rate increases?” said Peter Boockvar, chief investment officer at Bleakley Financial Group. “He’s going to do that by still saying the Fed’s going to stay tight for a while. Just because he’s done doesn’t mean it’s a quick bridge to an ease.”
The Fed’s rate hike Wednesday would be the eighth since last March. It would put the fed funds target rate range at 4.50% to 4.75%. That is just a half percentage point away from the Fed’s estimated end point, or terminal rate range of 5% to 5.25%.
“I think he will push back on financial conditions. I think the markets are expecting that. I think people realize how much credit spreads have moved, how much the equity market has moved, how much tech stocks have moved. This…
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