Fed rate hike: what to expect before Christmas

The Federal Reserve will enlist a new tightening of its monetary policy in an attempt to curb the ongoing inflation in the United States. However, the adjustment will not be as wide as in previous meetings.

Experts interviewed by CNN note that The Fed will raise interest rates by half a point. Federal funds futures on the Chicago Mercantile Exchange show that chances are 80%.

The Fed raised its key rate to 0.75% at its last four meetings in June, July, September and November, following two small hikes of 0.25% and 0.5% recorded earlier in the year. The key short-term interest rate was zero at the start of 2022 and now ranges from 3.75% to 4%.

Despite the fact that the Fed’s aggressive monetary policy moves are trying to bring inflation to 2% annual growth, it continues to remain at a higher level than expected.

The consumer price index settled down in October at the level of 7.7% compared to last year. It reached 8.2% in September and reached 8.3% in August after reaching 8.5% in July. In the previous month, it reached its highest rate in 40 years – 9.1%.

A Bloomberg poll of economists showed the Fed would approve a 50-point hike at its December meeting. followed by two raises of 25 points at the February and March 2023 meetings..

Jerome Powell, the chairman of the Fed, hinted at the November meeting that the next adjustments could be smaller than those seen recently. He also said that it is too early to stop raising rates because they are needed to find a level that will curb inflation.

While the Fed’s rate hike has had a limited impact on the economy so far, mortgage rates have skyrocketed, hurting housing demand. However, the labor market remains strong, with wages rising and consumer spending stable, experts say.