UBS Private Wealth Management financial advisors Sarah Ponchek and Lou Basenise discuss how rising interest rates and inflation are impacting the market on Morning with Maria.
Fed officials said at their December policy meeting that interest rates are likely to peak on the back of recent declines in inflation, and that a rate cut could be warranted in 2024. Agreed.
Minutes of the central bank's Dec. 12-13 meeting released Wednesday show central bank officials are generally optimistic about the trajectory of inflation and expect to start cutting interest rates before the end of the year.
“While discussing the policy outlook, participants expressed the view that policy rates are likely to be at or near the peak of this tightening cycle, but the actual path of policy remains uncertain,” the meeting minutes said. “It depends on how the economy develops,” he said.
Federal Reserve Chairman Jerome Powell attends a press conference after the Federal Open Market Committee on September 21, 2022 in Washington, DC. (Chen Mengtong/China News Service via Getty Images / Getty Images)
officials voted at the meeting But policymakers also opened the door to multiple rate cuts in 2024 on signs that the economy is starting to slow in the face of tight monetary policy.
In the latest quarterly economic forecast released after the meeting, a majority of Fed officials at the meeting expect rates to fall to 4.6% by the end of 2024, with at least three quarter-point rate cuts expected next year. suggests that it will be done. Policymakers also agreed to further rate cuts in 2025 and 2026.
Pedestrians pass by the Marriner S. Eccles Federal Reserve Board building on June 3, 2023 in Washington, DC. (Photographer: Nathan Howard/Bloomberg/Getty Images)
No official expects interest rates to rise further this year.
“We use the word 'either' to recognize that we are likely at or near the highest interest rates of this cycle,” Fed Chairman Jerome Powell told reporters at a post-meeting press conference in Washington, D.C. '' was added,'' he said. We don't want to take the possibility of further rate hikes off the table. ”
Rising interest rates tend to raise interest rates on consumer and business loans, forcing employers to cut spending and slowing the economy. Rising interest rates have pushed the average interest rate on a 30-year mortgage above 7% for the first time in years. Borrowing costs for everything from home equity lines of credit to auto loans and credit cards have also skyrocketed.
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