Fed rates are at 15 year high

The Fed met for the last time for 2022, and finally slowed its rate hike from the usual 0.75% to 0.5%.  Fed rate is now at 4.25% – 4.5%.

What did I learn from reading various news sources:

The Bad

  • Powell continue to use negative words, such as “We are not done”.
  • Fed intends to keep rates higher through 2023.
  • In Sep 2022, the Fed’s dot plot showed peak interest rate for 2023 at 4.6%.  At present, Fed’s dot plot shows peak 2023 interest rates at 5.1%.
  • No reductions till 2024.
  • Interest rates projected to stay above 4% in 2024.

The Good

  • Interest rates is currently at 4.25% – 4.5%. We are close to the ceiling at 5.1%.
  • Fed has entered a new phase where they start thinking how much to raise, rather than raising rates at all costs to battle inflation.

Have we seen the worst? If the worst is over, it would mean inflation is on sustained downward path. This is me is the key. We also have to watch out for the world’s economy sliding into recession in 2023 – which may potentially mean a change of direction for the Fed.

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