Fed matches year of hot inflation with feverish rate hikes
Wall Street expects the impact of the Federal Reserve’s most aggressive year of interest rate hikes in at least three decades to continue to be felt through next year
NEW YORK (AP) — Wall Street expects the impact of the Federal Reserve's most aggressive year of interest rate hikes in at least three decades to continue to be felt through next year.
The central bank’s plan to fight stubbornly high prices on everything from food to clothing has been the central focus for Wall Street in 2022. The Fed’s benchmark rate currently stands at 3.75% to 4%, up from close to zero in March. That marks the sharpest rise since at least 1990 and the rate is expected to increase by another half-percentage point at the Fed’s final policy meeting in December. It could go higher than 5% in 2023.
As the economy bounced back from the virus pandemic, supply chains couldn’t keep up with demand. A spike in oil and gasoline prices earlier in the year added more fuel to inflation. The Fed has been very clear it will keep raising rates until it sees inflation cooling. That's made borrowing much more difficult and weighed heavily on stocks.
Companies with high valuations, especially technology firms, became less attractive as interest rate hikes made bond yields more lucrative. Major indexes have been extremely unsteady throughout the year as investors’ hopes for a Fed pivot to a less aggressive policy have been repeatedly dashed by more hot readings on inflation.
