The bigger question is if there’s one more hike coming after that in 2023, and how long the Fed intends to hold rates at currently high levels for. Of course important inflation and jobs releases for June that will come before the Fed meets that could alter the Fed’s thinking too. So it seems likely that the Fed will raise rates in July, though more clues will come from Fed statements over the coming weeks. That said, it is not clear that every Fed participant shares this view, for example from the Fed’s Summary of Economic Projections from June 14, it appears that two policymakers forecast holding rates steady from here until the end of 2023, though all others do see rates moving higher to varying degrees before year end. If that were to occur it would take short-term rates up to 5.25%-5.5%. The CME’s FedWatch Tool which measures market expectations of Fed moves, sees an over eight in ten chance that a hike is coming on July 26. ![]() Virtually all policy makers see rates ending next year below current levels but above 4. This suggests a hike for a July is likely, though the Fed’s plan beyond that in terms of potential rate hikes is less clear. The Fed has stated so far that it expects to maintain rates at high levels for 2024. In testimony before Congress on June 21, Fed Chair Jerome Powell said, “Nearly all FOMC participants expect that it will be appropriate to raise interest rates somewhat further by the end of the year.” He also said that the inflation fight, “has a long way to go.” In addition, in a press conference after the June interest-rate decision, Powell referred to holding rates steady as a “skip”, implying that we could see rates move up again in July. ![]() Importantly the jobs market has remained strong enough to enable the Fed to fight inflation with limited concerns of causing a recession, even though the inverted yield curve might suggest otherwise. ![]() Basically, core inflation has proven hard to tame, even though headline inflation has dropped. For 2023 so far, the Fed has won out over the market.
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