The Fed is expected to announce a three-quarters-point rate hike Wednesday afternoon for the fourth straight month. But investors are hoping that Fed Chair Jerome Powell will soon suggest that the central bank “pivot” and slow its pace of rate hikes.
These dreams can be shattered.
“I’m not convinced that Powell is backing down,” he said Danielle DiMartino Booth, CEO and Chief Strategist of Quill Intelligence to CNN’s Alison Kosik on Markets Now on Wednesday. “The responsibility lies with 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 as the job market remains healthy.
The Fed will remain vigilant as consumer prices rise, Rick Rieder, Chief Investment Officer Global Fixed Income at BlackRock, I Agree.
“A pivot can be aggressive. We still have high inflation and still solid employment,” Rieder told Kosik.
But Rieder said this could be the last rate hike of this magnitude. Because the previous interest rate hikes are already affecting parts of the economy: “You can see that in housing construction and soon also in cars and other interest-sensitive sectors.”
DiMartino Booth is even more worried about the impact of rate hikes.
“The Fed is definitely affecting consumption,” she said, adding that “recession is pretty much a foregone conclusion.”
To make matters worse, she said, “there may be an extended period in which we try to heal from this unusually large scale [rate] migratory cycle.”