The Federal Reserve raised interest rates .75 basis points for the second consecutive month. The market was largely anticipating this move and now turns its attention to how long this aggressive pace is going to last.
The Fed’s policy rate, is now set to a range of 2.25 to 2.5%. But the Federal Open Market Committee signaled in its post-meeting statement that more is coming, saying that it “anticipates that ongoing increases in the target range will be appropriate.”
Market watchers say this indicates the Fed is poised to increase rates again in September and beyond.
Alan Brugler, Brugler Marketing, “Basically The Fed said they were going to wait for further data before deciding how big of a rate hike to make the next time. The default assumption is that they still need to be aggressive of a 3/4 point again in the next meeting but they basically said they’re going to wait on some of the date. This was about what the market expected and you didn’t get much of a reaction when the announcement was made.”
Even though many commodity prices, including grains and the energy sector, have cooled...market analysts says it may take a while for inflation to slow down.
Don Roose U.S. Commodities says, “I think we have recessionary fears baked into the market as the Fed’s trying to what they look at as a soft landing. You know try to raise interest rates just enough so you don’t kill the economy. But inflation rate continues. We think over the next couple of months you’re going to see the inflation rate go up to 10-percent Michelle, just because you kick off one month at another.”
He says it’s a tough balancing act to slow down inflation without setting the economy backwards. With the recent retail slowdown the Fed will need to be careful but Roose says they need to get inflation under control now or the economy will pay for it later.
Markets are currently expecting the central bank to raise rates through the end of 2022 a sum total of a full point. And then reverse course in 2023.
