Our forecast of another rate hike in September 2023, followed by a hold, is in line with the current expectations of most economists and market participants. The Federal Open Market Committee (FOMC) has raised interest rates four times this year in an effort to combat high inflation, and it is widely expected to raise rates again at its next meeting on September 20-21.
However, there is growing uncertainty about how much further the Fed will need to go in its rate-hiking campaign. Some economists believe that the Fed will need to raise rates more aggressively in order to bring inflation down to its 2% target. Others believe that the Fed is already close to raising rates enough, and that further hikes could risk tipping the economy into recession.
In light of this uncertainty, it is possible that the Fed will decide to pause its rate hikes after the September meeting. This would allow the Fed to assess the impact of its previous rate hikes on the economy and inflation. If the Fed is satisfied with the progress on inflation, it could decide to keep rates on hold for a period of time.
However, it is also possible that the Fed will decide to continue raising rates after September. This would be the case if the Fed believes that inflation is still too high, or that it is not coming down quickly enough.
Overall, your forecast of another rate hike in September, followed by a hold, is a reasonable one. However, it is important to note that there is a great deal of uncertainty about the Fed’s future plans, and the Fed could decide to go in a different direction depending on the data.
Here are some factors that could influence the Fed’s decision to hike or hold rates after September:
The pace of inflation: If inflation continues to come down at a steady pace, the Fed may be more likely to pause its rate hikes. However, if inflation remains high or starts to rise again, the Fed may be more likely to continue hiking rates.
The strength of the economy: If the economy continues to grow at a healthy pace, the Fed may be more likely to pause its rate hikes. However, if the economy starts to slow down or contract, the Fed may be more likely to pause or even cut rates in order to support economic growth.
Financial market conditions: The Fed will also be watching financial market conditions closely. If the stock market starts to decline sharply or if interest rates rise too quickly, the Fed may be more likely to pause its rate hikes in order to avoid a financial crisis.
Ultimately, the Fed will make its decision based on its assessment of the overall economic and financial situation. It is important to note that the Fed’s views can change over time, and the Fed does not have a pre-set path for interest rates.