DECEMBER 12, 2022 – FED MEETS THIS WEEK, 50 BP RATE HIKE EXPECTED
The Federal Reserves has its final meeting of 2022 this Tuesday and Wednesday. Another rate increase is a certainty, and it is anticipated they will raise rates by 0.5 percent this round, after 0.75 percent increases at each of their last four meetings.
At a meeting last week, the Fed signaled they are likely to raise rates by 0.5 percent, but elevated wage pressures could force them to lift rates to higher levels. Policy makers are expecting price pressures to ease in 2023, but wage pressure and inflation in the service economy could lead them to raise rates above the targeted 5 percent benchmark. The Fed is trying to balance raising rates too little, which will lead to ongoing inflation, with raising them too much, causing unnecessary economic weakness. Powell believes slowing the rate hikes at this point is a good way to balance the risks.
A 0.5 percent rise will bring the benchmark rate up to a range of 4.25 to 4.5 percent, the highest level since 2007.