January 3, 2023 — A Look Forward to Interest Rates in 2023


During 2022 the Fed was faced with unexpected and entrenched inflation, forcing them to aggressively raise rates with seven rate hikes during 2022. Since March 2022, the effective federal funds rate has risen more than 3.5 percent, the steepest climb in recent history. The benchmark rate is now in a range of 4.25 to 4.5 percent, a 15-year high

The Federal Reserve presidents are predicting the Federal funds rate will reach 3.9 to 4.9 percent in 2023, with 0.25 percent increases expected at the next two Fed meetings. The Fed believes rates will peak in a range between 5 and 5.5 percent once all is done.

The Fed has downgraded its economic outlook for 2023 as it tries to balance supply and demand. GDP for 2023 is predicted to be 0.5 percent and the unemployment rate is expected to rise to 4.6 percent from the current 3.7 percent during 2024. Core PCE, the Fed’s inflation measure, is expected to drop to 3.5 percent in 2023 and 2.5 percent in 2024.

You still have time to mitigate future risk on your financial obligations by taking a look at interest rate hedges. Matching a hedge to your loans will allow you to lock into the lower rates that are still available today.