15 December 2022 | Other

Fed raised the rate by 0.5% and expects further increases

It’s reported that the rate hike at yesterday's U.S. Federal Reserve (Fed) meeting was lower than previous ones. However, the Fed says that interest rates will continue to rise next year, despite the apparent easing. Another reason for rising is that inflation is projected to be more stubborn than officials expected. 

At the moment, the rate is in a range of 4.25–4.5%, which is the highest in the last 15 years. It’s noted that the Fed officials voted unanimously for a half-percentage increase.

Thus, the Fed has made it clear that a slowdown in the rate of increase doesn’t mean the end of the fight against inflation. According to some projections, the cost of borrowing will rise substantially, much more than previously expected.

Some of the Fed officials predict a rate hike to 5.1% by the end of next year. Policymakers say the rate level will remain high for a long time. However, despite all the predictions, investors are hopeful that the rate will start to decline next year.

Stephen Stanley, chief economist at Amherst Pierpont Securities, notes an interesting contradiction that creates certain risks for the market. On the one hand, there are many calls to give up the fight with the Fed, but on the other hand, the market is ready to fight it. 

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