Why would the Fed lower interest rates?īarclays says rate cuts this year “are very unlikely unless a broad-based financial crisis or a very significant external shock hits the economy.”īarclays expects a recession that begins in the second half of the year to cause about 800,000 job losses and push the unemployment rate from 3.5% to 4.9% by early 2024. “It’s a tricky proposition,” Millar says. Morgan Stanley, however, also notes that such developments “would have to be weighed against information on bank lending and its economic effects.” Put simply, if the banking crisis is restraining borrowing and the economy by more than expected, the Fed would have to balance the conflicting forces. If the May payroll gains top 200,000, that also could lead the Fed to bump up rates in coming months, Barclays says. Similarly, monthly job growth has slowed from 472,000 in January to 236,000 in March. When does the Fed meet?: What is the Federal Reserve's 2023 meeting schedule? Here is when the Fed will meet again.įed 101: Here's what to know and when to expect (another) rate hike. If data in the next few weeks shows inflation exceeding that pace, “that might be grounds for another hike,” the research firm says. That would require monthly price increases to average less than 0.3%, Barclays says. The Fed expects core annual inflation to fall to 3.6% by the end of the year, according to its March forecast. “We think a June hike is back on the table if inflation progress stalls along with continued strong employment gains in May,” Barclays wrote in a research note. What could cause the Fed to raise interest rates again? Companies often pass along higher labor costs to consumers through higher prices. employees’ pay and benefits increased 1.2% in the first quarter, topping the fourth quarter pace and economists’ estimates. But an underlying “core” measure that strips out volatile food and energy items remained higher than estimated at 4.6%.Īlso, a barometer of wage growth showed that U.S. A government report last week revealed that the Fed's preferred gauge of inflation fell to 4.2% last month from a 40-year high of 7% last June. Recent economic data offer a mixed picture of inflation. In March, the Fed forecast that it would raise its key rate by another quarter point to a range of 5% to 5.25% and then halt the inflation-fighting effort, which has hoisted the benchmark rate from near zero in early 2022. Such a strategy wouldn’t come as a surprise. The Fed and homebuying season: With federal reserve interest rates set to rise, how will the housing market be affected? Instead, Goldman Sachs expects the central bank to say rates are likely enough to achieve that goal but the Fed will closely monitor economic data to determine its next interest rate moves. In other words, the Fed will probably signal that while it’s pausing, it’s poised to raise or lower rates this year but is more likely to lift them, Millar says.Įconomists expect the Fed to remove guidance in its March post-meeting statement that “some additional (rate increases) may be appropriate” to lower inflation to the Fed’s 2% target. "They want to avoid causing a deep recession.” Will the Fed raise rates again this year? “They’re not afraid of having a shallow recession," says Barclays economist Jonathan Millar. Fed officials don't expect rate cuts until 2024. And the central bank will likely stress it doesn't plan to cut interest rates this year, as markets are forecasting, even in the event of a widely predicted recession. It’s expected to say it’s prepared to raise interest rates further if inflation and the labor market don’t cool down as projected. The Fed has no plans to unfurl a “Mission Accomplished” banner. How Fed hikes hit your wallet: Federal Reserve's on track for one more rate hike. Live updates: Fed expected to hike interest rate another 0.25 percentage point Any sign of a halt would come sooner than anticipated and underscore that the recent failures of Silicon Valley Bank and Signature Bank have acted as a kind of rate increase by curbing lending, economic growth and, most critically, inflation. And it could ease the worries of investors battered by the market-dampening fallout from the 13-month rate hiking campaign. The prospect of rate increases ending should be a welcome relief for consumers and businesses struggling with higher borrowing costs. After its most aggressive interest rate hikes in 40 years, the Federal Reserve on Wednesday is expected to approve a final quarter-point increase and signal a long-awaited pause, economists say.
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