3/7/2023: Powell Said Rates Likely to be Higher than Previously Anticipated
Stock markets tanked
In a senate hearing this morning, the Fed chair Jerome Powell said that FOMC might hike interest rates higher than previously anticipated due to the recent low unemployment and high PCE data. . Remember people were so excited about his disinflation comment just a few weeks ago? Well, not so fast. Chances are the Fed knows they need to hike the rates higher but they want to communicate it in a gentle way. Previously the peak rate expectation was 5-5.5% but it sounds like the Fed would like to push that higher. In the FOMC announcement next week, they are going to publish the survey for rate expectations in addition to a new rate increase. It’s going to be a nerve wrecking moment for all investors. I am pretty sure we are not going back to zero interest rate any time soon unless another pandemic-scale disaster strikes. I accept the fact that the interest rate will stay at the current level or higher for at least another year and I am living with this new reality by being cautious. It’s not the time to buy the dip, to expand headcount aggressively or to get into debt. It’s the time to learn, to do more with less and to be liquid.
There are better tools on Bloomberg, but a nice free source for rate forecasts.
https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html?redirect=/trading/interest-rates/countdown-to-fomc.html