With ongoing inflation and recent bank failures, many Americans are worried about how much longer the Fed will continue to increase interest rates. Apparently, the Fed doesn’t even know. According to Bankrate, officials are torn. While a majority see one increase, others say to expect up to four more. Americans are also fearing the possibility of an upcoming recession. Despite stronger economic data earlier this year, many experts still believe the economy could face a hard landing. Lakshman Achuthan, the co-founder of the Economic Cycle Research Institute, says that data now appears to be a “flash in the pan.” “We’re seeing lots of symptoms [of a significant downturn] when you have crises,” he told CNBC. When it comes to the Fed, economists have a mantra: when the central bank starts hiking rates, it keeps going until something breaks. The big question now is: what’s going to break next?
How much more will the Fed raise rates in 2023? Here’s what experts are saying
Most of the Federal Reserve’s interest rate hikes may be in the rearview mirror. The question now: How many more increases can officials sneak in before the U.S. economy breaks?
After spending last year raising interest rates at a speed unmatched since the 1980s, Fed policymakers are taking a different approach in 2023: hiking interest rates at a slower and more deliberate pace. U.S. central bankers in March lifted interest rates by a quarter of a percentage point, bringing its benchmark borrowing rate to a new 4.75-5 percent target range. Rates haven’t been at this level since the mid-2000s.
But that smaller move wasn’t without bumps in the road. After downshifting to quarter-point moves in February, the Fed was gearing up to raise interest rates by a larger half point in March as inflation remained more stubborn than expected. That, however, was before two major bank failures rocked financial markets, creating stability concerns and risks of knocking the economy off course.
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Business Insider/Zinya Salfiti
Don’t rule out a ‘hard landing’ for the US economy and that means it’s still ‘tough going’ for stocks, forecaster says
The US economy still faces the risk of a `hard landing’ – or a sharp and disruptive downturn – despite some upbeat data that was reported earlier this year, according to a top forecaster at the Economic Cycle Research Institute.
The ECRI’s weekly leading index – which anticipates emerging economics trends based on government data, surveys and market prices – is currently signaling a potential weakening of activity in the world’s largest economy, Lakshman Achuthan, the institute’s co-founder, told CNBC Wednesday.
A set of strong economic data that came in earlier this year, including January’s job numbers and retail sales, now appears to have been a “flash in the pan”, he said.
You can read the full article, here.
Inflation or the Economy: What Will Fed Rate Hikes Break First?
It’s a mantra for economists: When the Federal Reserve starts hiking rates, it keeps going until something breaks. So what’s going to break next?
In the past year, the Fed has raised its benchmark interest rate to a range of 4.75% to 5%, the highest since 2006, from near-zero, marking the fastest campaign since the 1980s. The central bank has cut off the cheap money that kept the economy churning through the pandemic, fueling real estate and stock market booms.
That’s put many parts of the economy under stress. The sudden failure of Silicon Valley Bank, the country’s 16th largest bank by assets, raised fear that the financial system is showing cracks, prompting a drastic rescue operation from the government.
You can read the full article, here.