What to expect from the Fed’s meeting

The U.S. Federal Reserve (Fed) is expected to raise interest rates by 0.5% at Wednesday's meeting. 

It’s worth noting that each of the four previous Fed’s meetings, the rate has been raised by 0.75%. While the coming increase will clearly be smaller, it’s still higher than the usual one of 0.25%. For this reason, it’s likely that the cost of borrowing will become higher, which in turn will cause economic problems for many businesses and households.

Thus, the new interest rate could be in the range between 4.25 and 4.5%, which would be the highest figure in the last 15 years.

Inflation is unlikely to slow due to the lack of workers and rising wages as a result. Nevertheless, Wall Street believes that the Fed will be forced to give up on further hikes. Traders, in turn, expect a rate cut in the second half of next year.

Analysts at JPMorgan predict that the Fed will end its cycle of rate hikes by the beginning of the second quarter of next year. They also predict two more 25-basis-point hikes in the first half of the year.

The time between the maximum rate and the beginning of its decrease averages 11 months. Thus, even if the Fed stops raising, the rate is likely to remain high until 2024.