The Fed is expected to announce a three-quarters of a percentage point rate hike for the fourth consecutive time Wednesday afternoon. But investors hope Fed chair Jerome Powell will suggest that he central bank will soon “pivot” and slow its pace of rate hikes.
Those dreams may be dashed.
“I’m not convinced that Powell is backing down,” said Danielle DiMartino Booth, CEO and chief strategist of Quill Intelligence to CNN’s Alison Kosik on Wednesday’s “Markets Now” show. “The onus is on him to stay the course.”
DiMartino Booth, who worked at the Dallas Fed for nine years, said she thinks the Fed will continue to focus more on fighting inflation, especially since the jobs market remains healthy.
The Fed is going to remain vigilant about surging consumer prices, Rick Rieder, chief investment officer of global fixed income at BlackRock, agreed.
“A pivot may be aggressive. We still have high inflation and employment that is still solid,” Rieder told Kosik.
But Rieder said this might be the last rate hike of this magnitude. That’s because the previous rate increases are already having an effect on parts of the economy: “You see it in housing and you’ll soon see it in autos and other interest rate sensitive sectors.”
DiMartino Booth is even more concerned about the impact of rate hikes.
“The Fed definitely having an effect on consumption,” she said, adding that “a recession is pretty much a foregone conclusion.”
Making matters worse, she said, there “could be a prolonged period of time in which we try to heal from this unusually large [rate] hiking cycle.”
Leave a Reply