The US Federal Reserve has been gradually increasing its benchmark interest rate in order to control inflation since March 2022. After a series of 75 basis point increases in the same year, the Fed reduced the short-term rate by 50 points at the last December meeting. On February 1, the following year, the 25-basis-point increase pushed rates to 4.625%.
The central bank has indicated a forecast peak of 5.1% for its policy rate and no rate cuts in 2023. A Reuters survey of economists revealed that, aside from Goldman Sachs, many other economists believe the US Federal Reserve will raise interest rates at least twice more in the near future. None of the analysts anticipated a rate reduction in 2023. Prior to the discharge of new US data, J.P. Morgan projected a funds rate of 5.1% by the end of June. Bofa Global Research estimated that the terminal rate by the end of 2023 would be in the range of 5.0% to 5.25%. UBS had forecasted two rate increases of 25 basis points each, while the prior prediction was higher than their estimates. European Investment Bank has operations in March, there may be a rate increase in Europe, according to them. This hiking cycle will soon be over. The policy aim will stay at 4.75-5% until the end of 2023.
By year-end, the Federal Reserve has the capability to control inflation, yet doing so will necessitate a number of steps. By providing a clearer path to success, the Federal Reserve can increase its chances of achieving its goals. Our research into inflation shows that for the Federal Reserve to consider their efforts a success, the core CPI should remain close to 2 percent over a one-year period. In order to do so, the Fed should announce its intent to conduct monetary policy in a manner to confine the growth in current dollar spending (GDP) to no more than 4 percent.
Wall Street traders are now placing a bet that the United States Federal Reserve will hike interest rates beyond 6% this year. Preliminary open interest data from the Chicago Mercantile Exchange is demonstrating an increase in current trading activity, according to Bloomberg. On Tuesday, it was reported that a trader has wagered roughly $18 million that the Federal Reserve will raise the interest rate to 6% by the expiration of the current options in September.
0. “Why the Fed Will Hike Rates Higher Than Expected: Inflation Forecast” Business Insider, 16 Feb. 2023, https://www.businessinsider.com/federal-reserve-hike-rates-higher-inflation-forecast-recession-economy-powell-2023-2
1. “The Fed And Markets” Barchart, 13 Feb. 2023, https://www.barchart.com/story/news/14154836/the-fed-and-markets
2. “Fed Swaps Price in March and May Rate Hikes, Expect Peak at 5.3%” Yahoo! Voices, 17 Feb. 2023, https://www.yahoo.com/now/fed-swaps-price-march-may-154025367.html
3. “Federal Reserve to hike rates by 25 bps each in March, May and June – Goldman Sachs” FXStreet, 17 Feb. 2023, https://www.fxstreet.com/news/federal-reserve-to-hike-rates-by-25-bps-each-in-march-may-and-june-goldman-sachs-202302170352
4. “Goldman Sachs forecasts three additional US Fed rate hikes but no reductions in 2023” Business Upturn, 17 Feb. 2023, https://www.businessupturn.com/world/goldman-sachs-forecasts-three-additional-us-fed-rate-hikes-but-no-reductions-in-2023/
5. “Will the Federal Reserve Hit Its Year-End Inflation Target?” The Epoch Times, 17 Feb. 2023, https://www.theepochtimes.com/will-the-federal-reserve-hit-its-year-end-inflation-target_5063967.html
6. “Wall Street Traders Betting Interest Rate Will Surpass 6% This Year” Coinspeaker, 9 Feb. 2023, https://www.coinspeaker.com/wall-street-traders-interest-rate/