Wells Fargo economists are predicting that the U.S. will tip into a recession in 2023 after the Fed raised interest rates by 75 basis points on Wednesday. It was the biggest hike since 1994 and much larger than the traditional 25-basis point increment. Fed Chairman Jerome Powell stated that a larger increase may be maintained at the July meeting. “From the perspective of today, either a 50 basis point or a 75 basis point increase seems most likely at our next meeting,” he said. The news, combined with growing concerns about a possible recession, caused U.S. stock futures to fall on Thursday morning.

 

Business Insider/Harry Robertson
Wells Fargo says the US will fall into recession after the Fed delivers its biggest rate hike since 1994

Economists at Wells Fargo said Wednesday they expect the US to tip into a recession in 2023 after the Federal Reserve hiked interest rates by the biggest amount since 1994 in a bid to choke off inflation.

The Fed’s move prompted a shifting of views on Wall Street about the US growth outlook, with analysts across the board saying the risks of a recession are rising.

The central bank on Wednesday raised interest rates by 75 basis points — much more than the traditional 25 basis point increment — to take the target federal funds rate range to 1.5% to 1.75%.

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CNBC/Yun Li
Powell says the Fed could hike rates by 0.75 percentage point again in July

Federal Reserve Chair Jerome Powell said Wednesday the central bank could raise interest rates by a similar magnitude at the next policy meeting in July as it did in June.

“From the perspective of today, either a 50 basis point or a 75 basis point increase seems most likely at our next meeting,” Powell said at a news conference following the central bank’s policy decision. “We anticipate that ongoing rate increases will be appropriate.”

“The pace of those changes will continue to depend on incoming data and evolving outlook on the economy,” Powell said. “Clearly, today’s 75 basis point increase is an unusually large one, and I do not expect moves of this size to be common.”

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Yahoo Finance/Emily McCormick
Stock futures slide amid renewed recession concerns

U.S. stock futures fell Thursday morning as investors weighed the potential economic costs of the Federal Reserve’s ongoing fight with inflation.

Contracts on the S&P 500 fell by more than 2% in early trading, reversing course after rising 1.5% on Wednesday. Contracts on the Nasdaq declined by more than 2.5%, and Dow futures sank by more than 500 points, or 1.8%. The 10-year Treasury yield rose to about 3.44%, hovering near its highest level since 2011.

Stocks, which moved initially to the upside following Fed’s first 75 basis point rate hike since 1994 on Wednesday, turned around as traders assessed the potential that the central bank’s moves to bring down inflation would trigger a deeper downturn in economic activity.

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