Fed Expected to Continue Rate Hikes, Recession Fears Grow
Even with some easing in recent months, inflation remains well above the Federal Reserve's target range of 2%. The Fed has aggressively raised rates this year and they don't plan to let off the gas any time soon. "Two of the Fed's regional presidents, John Williams and James Bullard, warned on Monday that the inflation threat hasn't faded," reads an article from Markets Insider. "The U.S. central bank may have to lift rates higher and keep them there throughout next year to curb soaring prices, they said."
So far this year, the Fed has hiked rates from nearly zero in March to a range of 3.75% to 4% today. But inflation remains hot despite the Fed's attempt to combat high prices, increasing the risk of a recession or stagflation. "As extremely high prices damage purchasing power and aggressive Federal Reserve policy increases borrowing costs, we continue to expect a shallow recession for the U.S. economy in the first half of 2023," said Beth Ann Bovino, top S&P Global Ratings economist in a recent outlook.
Strategists expect weaker growth and rates to peak at nearly 5% in 2023, and investors' hopes of an end to inflation are long gone. "Instead of rebounding, the U.S. economy will shrink and face stubborn price increases next year," Christopher Smart, chief global strategist of the Barings Investment Institute, told the news outlet.