Connect with us

Fed Rates

Federal Reserve Signals Interest Rate Hike This March



FED RATE HIKE on red arrow overlay with dollar banknote | Federal Reserve Signals Interest Rate Hike This March | featured

Analysts expect that the Federal Reserve will signal its intention to implement its first interest rate hike this March. The agency will also implement other policy tightening activities, which will now reverse easy money programs during the pandemic.

RELATED: Goldman Sachs Expects Fed to Hike Interest Rates 4 Times This Year

Fed To Implement Interest Rate Hike By March

The Federal Reserve ( FED ) to control interest rates | Fed To Implement Interest Rate Hike By March | featured

The Federal Reserve began its meeting earlier, which will conclude Wednesday afternoon. Observers are expecting the central bank to announce its commitment to implement policy tightening measures to combat inflation. 

The US stock market is currently in the midst of a correction. This is the reason why the agency would like to accelerate its interest rate hike plans to March instead of later.

Mark Cabana, the US short rate strategist for Bank of America, agrees with the move. “We don’t expect them to sound dovish,” he said. “The [bond] market seems to be reacting to the drop in equities, plus the geopolitical tensions,” Cabana added.

He also said that “maybe the Fed sounds not as hawkish as they otherwise would have. But we don’t think the Fed is going to come out and tell the market it’s wrong for pricing in four rate hikes this year.”

Federal Agency Caught Up in Inflation

After more than a year of insisting that the current inflation is transitory, the Fed now finds itself battling with the highest inflation rates in 40 years.

The loose monetary policy during the pandemic, including near-zero interest rates, boosted inflation to 7%, the highest since 1982. 

Cabana expects the Fed to announce its first interest rate hike during its next meeting in March. The agency made a similar comment in 2015, and then promptly raised interest rates a month after. 

Stock Market Bloodbath

Meanwhile, the bloody stock market sell-off, where many investors abandoned growth stocks in favor of value ones, is ongoing. The S&P 500 fell into correction rates as early as Monday, posting a 10% decline from its previous record close.

However, tensions in Eastern Europe and the spiraling high cost of oil prices are keeping market pressure on. 

Diane Swonk, the chief economist at Grant Thornton, said that the Fed’s messaging remains limited. “What they will have to do is say we will respond as conditions warrant.

We have inflation to deal with, and even with what we’re seeing, financial conditions are too loose. That’s the only message they can give at this time,” she observed. 

Powell To Adopt Hawkish Tone And Signal Interest Rate Hike

Fed Chairman Jerome Powell will brief the media after their 2 pm meeting Wednesday. Many expect the Fed chief to sport a more hawkish tone.

Even if he says that the agency will use every tool they have to fight inflation, the markets remain down. “I don’t think they’re going to be spooked by this.

They need to tighten financial conditions so they can have a better handle on inflation. I just don’t think the Fed is going to be surprised by this, Cabana added. “Nor do I think they’re going to feel the economy is going to fall off a cliff.”

In addition to the interest rate hike, the Federal Reserve also plans to reduce their $9 trillion balance used in buying bonds.

This activity aimed to prop up the economy but has outlived its usefulness. Many strategists expect the wind-down to begin in May or June this year. 

Watch the CNBC Television video reporting that markets expect the first rate hike to come in March:

What do you think of the Fed’s plan for an interest rate hike this March?

Please Select One:

View Results

Loading ... Loading ...

What do you think of the Federal Reserve’s plan to hike interest rates this March? Will this be a great first step in combating inflation?

Tell us what you think. Share your comments below.

Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *

Copyright © 2023 The Capitalist. his copyrighted material may not be republished without express permission. The information presented here is for general educational purposes only. MATERIAL CONNECTION DISCLOSURE: You should assume that this website has an affiliate relationship and/or another material connection to the persons or businesses mentioned in or linked to from this page and may receive commissions from purchases you make on subsequent web sites. You should not rely solely on information contained in this email to evaluate the product or service being endorsed. Always exercise due diligence before purchasing any product or service. This website contains advertisements.


Is THE newsletter for…


Stay up-to-date with the latest kick-ass interviews, podcasts, and more as we cover a wide range of topics, in the world of finance and technology. Don't miss out on our exclusive content featuring expert opinions and market insights delivered to your inbox 100% FREE!