The Likelihood of a Federal Reserve Rate Hike Grows Stronger
During his speech at the Jackson Hole Symposium, Federal Reserve Chairman Jerome Powell emphasized the Fed’s commitment to reducing inflation to 2%. Despite some economists suggesting that achieving this target may be difficult, Powell stated that it remains their goal. However, he acknowledged that reaching this target will require a period of below-trend economic growth.
Key Points:
- Powell reiterates the Fed’s commitment to a 2% inflation target
- Some economists argue for a higher target of 3% inflation
- Odds of a rate hike at the next Fed meeting in September rise to 19%
- Odds of another rate hike this year reach a two-month high of 52.1%
- Rate cuts not expected until June 2024
Following Powell’s speech, the likelihood of a rate hike at the Fed’s next meeting in September increased to 19%, according to the CME FedWatch tool. Additionally, the odds of another rate hike this year rose to 52.1%, reaching a two-month high. However, rate cuts, which many believe could stimulate investment in crypto and stocks, are not anticipated until June 2024.
Hot Take:
The Federal Reserve’s commitment to reducing inflation to 2% remains strong, despite some economists advocating for a higher target. Powell’s speech indicates that the Fed may need to endure a period of below-trend economic growth to achieve this goal. The increased likelihood of a rate hike suggests that the Fed is taking action to address the current economic conditions. However, it is important to note that rate cuts are not expected anytime soon, which may impact investment strategies in the short term.
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