The Fed is poised to raise rates even higher as recession risks rise.
No one was surprised Wednesday when the Fed lifted its benchmark interest rate by 0.75 percentage points for the fourth consecutive policy meeting, raising the fed funds rate to a range of 3.75% to 4%. The central bank also said it would be mindful of lags and the cumulative impact of policy.It was during Fed Chairman Jerome Powell’s press conference that the twists and turns started.
Terminal rate is going to 5% or higher “Powell is guiding that the median [interest rate] is likely to hit 5% or higher, which implies there may be several [Fed officials] above that level,” Holt said. “That comment tilts the balance of today’s events hawkish,” Parrish said, in an essay he called “From dove to hawk in 30 minutes.”“I think no one knows whether there’s going to be a recession or not. And if so, how bad that recession would be,” Powell added.
But Powell was upbeat. “It appears consumer spending is still positive. It is pretty modest growth level — it is not shrinking. Many retailers will tell you that consumers are still buying out there,” he said.David Wilcox, an economist with Bloomberg Economics and the Peterson Institute for International Economics, said “the building blocks” for a slowdown in spending are present in the economy.
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