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    Fed to Continue Raising Rates Despite Inflationary Pressures


    The Federal Reserve has been pushing up interest rates consistently since March 2022, with four consecutive rate hikes of 0.75% and a further 0.50% increase at the end of last year. The central bank then raised the benchmark rate again in February to a range of 4.5%-4.75%, signaling that a “couple more” increases are on the table this year.[0]

    In light of this, Goldman Sachs Group Inc.[0]’s chief economist Jan Hatzius has suggested the Fed might raise rates at its March, May and June meetings to beat inflation. This prediction is echoed by CME Group’s FedWatch Tool, which puts the terminal rate at 5.31% by July this year.[1]

    Fed Chairman Jerome Powell has also stated that increases look to continue, and that the bank’s goal is to push inflation to its 2% target rate.[2] However, the recent data from the Consumer Price Index (CPI) and Producer Price Index (PPI) shows that inflation may be more stubborn than some had hoped.[3] On a monthly basis, the CPI rose 0.5%, its fastest pace since October when it also rose 0.5%.[3] Wholesale prices, a leading indicator of the CPI trends to come, rose by 0.7% between December and January.[4]

    Given the economic data, traders on Wall Street have now fully priced in quarter-point interest rate increases at each of the U.S. Federal Reserve’s next two policy meetings.[5] Bank of America and Goldman Sachs have also revised their Fed policy forecasts to include a June rate increase in addition to raises in March and May.[6]

    The Fed’s goal is to ensure price stability, which it believes is the bedrock of the US economy.[7] As such, the central bank will most likely need to keep rates higher until inflation is back under control. Although the markets have rallied on the expectation of interest-rate cuts, it may be premature to discount rate cuts yet.[7] If inflation continues to decelerate in the latter half of the year, then the Fed may start to see a deceleration of rate hikes and possibly even a pause.[7]

    0. “Goldman Sachs: three more Fed rate hikes coming this year” Fox Business, 21 Feb. 2023,

    1. “Wall Street Prices In More Rate Hikes By The U.S. Federal Reserve”, 20 Feb. 2023,

    2. “The Fed And Markets” Barchart, 13 Feb. 2023,

    3. “You Can't Control Interest Rates, but You Can Control What You Do About Them” The Motley Fool, 16 Feb. 2023,

    4. “Why the Fed may ramp up the rate hikes after too-hot inflation and jobs numbers” Washington Examiner, 17 Feb. 2023,

    5. “Fed Swaps Price in March and May Rate Hikes, Expect Peak at 5.3%” Bloomberg, 17 Feb. 2023,

    6. “Fed Swaps Price in March and May Rate Hikes, Expect Peak at 5.3%” Yahoo! Voices, 17 Feb. 2023,

    7. “Outlook for US fixed income and equities Franklin Templeton” Beyond Bulls & Bears, 12 Feb. 2023,

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