With Half-Point Hike Behind It, How High Can the Fed Go?
The path ahead for interest rates and the economy depends on the answers to three key questions.
Jerome Powell took a 75-basis-point increase off the table, but that could come at a cost.
Photographer: Al Drago/Bloomberg
The Federal Reserve just undertook the most aggressive interest rate increase since May 2000, but nobody knows for sure how high rates are headed. As the members of the Federal Open Market Committee start a month of public appearances, hints about their views on three key questions are likely to dictate the path ahead for interest rates and the economy:
Markets rallied Wednesday after Chair Jerome Powell told reporters that the Fed would contemplate additional half-point rate increases but wasn’t actively considering an even more aggressive 75-basis-point increase. Yet that near-term reprieve — which could come with a cost — didn’t lift the broader veil of uncertainty that’s hanging over the economy. Inflation just hit the highest level in 40 years, and while most investors and economists agree that it will recede in the coming months, they disagree about what will happen afterward.