Fed set to hike rates to 22 year high today, experts give their views
investmentnews.comAmericans are braced for interest rates at their highest in 22 years as the Federal Reserve announces its decision Wednesday.
Despite having paused last month and data showing that inflation is cooling, there is little to suggest that things are where the Fed needs them to be, so a rate rise is all but certain according to many leading economists.
Andrew Patterson, senior international economist at Vanguard, is among those expecting a 25-basis-point hike today, given the strength of the U.S. economy and the need to bring inflation down to 2%.
“We believe that when the Fed reaches terminal with 1 to 2 more hikes, they are likely to remain on hold through at least the end of the year,” Patterson told InvestmentNews. “If inflation proves persistent, this may be a sign of a higher neutral rate and the Fed may need to go to 6% or beyond in order to bring inflation back to target.”
Vanguard still thinks there is high probability of recession either this year or next, which will be necessary to bring down inflation, but next year is now looking more likely than 2023.
Diane Swonk, chief economist at KPMG noted this week that Jerome Powell will be dealing with some committee members who do not agree with a return to hikes.
“Austan Goolsbee of the Chicago Fed has been clear that he believes the Fed should be done and could dissent but has been reluctant to actually pull that trigger. He is not alone. Raphael Bostic of the Atlanta Fed has voiced his desire to pause for longer; it would be a victory for Powell to get another unanimous vote,” Swonk opined in a note Monday.
However, she also expects a July rate hike to proceed.
Michele Raneri, vice president and head of U.S. research and consulting at TransUnion, says that a rate hike
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