The FED hikes rates between 5.25% and 5.5%. It turned out to be the highest level since 2001. Meanwhile, we are seeing a so-called no-shock rate hike that still triggers mixed reaction from both economists and market participants.
Analysts believe the steps taken by the Federal reserve can have different perspectives and outcomes. Varied scenarios triggered extra points for both bills and bears to argue. Some of the market participants demand an outright FED pause featuring the above-core PCE policy rate.
The market reacted immediately following the FED decision. The main problem was that the Federal Reserve leaves the door open for another rate hike if such measures are needed. If it happens, there will be a lean to neither a dovish nor hawkish stance.
The majority of experts agree that the FED will definitely raise rates again. It will happen if the core inflation rate does not go lower.
On the other hand, some analysts have the opposite opinion. They believe that the rate hike announced by the FED earlier will make it possible to stabilise prices. Some market participants are sure it is time for the Federal Reserve to ensure an extended period for the economy to let it absorb the impact of previous rate hikes.
Nevertheless, the risks associated with food, oil and energy costs are still pretty high. They can be affected by different factors that the FED simply cannot control.
On the other hand, the situation can improve, as we see cooling transportation costs, demand for servicing, and hiring. In simpler words, the latest 5.5% rate hike seems to be reasonable though quite restrictive. Such steps might help to push inflation back to 2.5-3% within the next few years.
We have already heard something similar before, haven’t we? Some economists do believe the FED will refuse further rate hikes, as core inflation is expected to slow down over the next couple of days. The only question is if the rates have peaked for this particular cycle or whether this is not the end.
The only thing all market participants agree on is to stay fully invested by having one’s portfolio well-diversified. They also advise you to steer clear of risky bonds and equities.
May the trading luck be with you!