Will the Upcoming Fed Interest Rates Projections Match the Current Market Expectations?
The chart below shows where the market expects the Federal Reserve (Fed) to set short-term interest rates over the next year. The Fed is scheduled to release its latest economic projections when it meets this week. If the projections differ from the current market expectations, we could see increased interest rate and market volatility.
Implied Overnight Rates & Number of Hikes/Cuts
Data as of 12/9/22. Source: Bloomberg.
- The market expects the Fed to raise short-term interest rates by 0.50% at its December meeting and then begin to slow the pace of rate hikes in 2023.
- Short-term rates are expected to top out at just under 5% in May 2023. The market expects the Fed to begin cutting rates in the second half of 2023.
- We will be watching closely to see if the Fed’s December interest rate projections match the current market expectations.
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