The Fed is expected to announce a rate hike of three-quarters of a percentage point for the fourth consecutive time on Wednesday afternoon. But investors are hoping Fed Chairman Jerome Powell will suggest the central bank will soon “pivot” and slow its pace of rate hikes.
These dreams can be shattered.
“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 Show “The markets now”. “It’s up to him to stay the course.”
DiMartino Booth, who worked at the Dallas Fed for nine years, said she believes the Fed will continue to focus more on fighting inflation, especially as the labor market remains healthy.
The Fed will remain vigilant in the face of soaring consumer prices, Rick Rieder, Global Fixed Income Investment Director at BlackRock, agreed.
“A pivot can be aggressive. We still have high inflation and still strong employment,” Rieder told Kosik.
But Rieder said it could be the last rate hike of this magnitude. That’s because previous rate hikes 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 is definitely having an effect on consumption,” she said, adding that “a recession is pretty much inevitable.”
To make matters worse, she said, there “may be an extended period of time as we try to heal from this unusually large situation. [rate] touring bike.”