Fed pushing on with rate hikes

Photo by Markus Spiske on Unsplash

What was the Fed's verdict this week?

Just on Wednesday, the Fed continues to raise interest rates (25 basis point rate hike), putting more pressure on the already-troubled banking sector in a bid to continue its combat against inflation.

What does this mean for the interest rate?

While the central bank’s peak rate forecast remains unchanged at 5.1%, Fed chief Jerome Powell also reiterated that the central bank could raise rates by more than expected if needed, and that it doesn’t expect to cut rates this year.

What about the turmoil in the Banking sector?

With the recent events in the financial industry, the availability of funding in the economy appears to have tightened and this sustained turmoil might actually help do part of the Fed’s work for it in combat inflation

The Fed’s saying it could still continue to hike and will likely keep rates higher through at least the end of 2023, but markets are still pricing in rate cuts by mid-year. That disconnect could lead to continued market volatility in the months ahead. So, now’s a good opportunity to check in on your investments – make sure your portfolio is well-diversified, and that your allocations reflect your risk appetite.