Bill Dudley, Columnist

Investors Would Be Better Off Believing the Fed

If markets remain optimistic, the central bank will just have to tighten more to achieve its inflation objective.

December 19, 2022 at 10:00 AM UTC

Bill Dudley is a Bloomberg Opinion columnist. A former president of the Federal Reserve Bank of New York, he is a member of Coinbase Global's advisory council.

He’s not kidding.
Photographer: Nicholas Kamm/AFP/Getty Images

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Try as it might, the Federal Reserve can’t seem to break the market’s relative optimism about the outlook for interest rates. But there’s one thing investors need to understand: The central bank has ample power to make its predictions come true.

The message from last week’s policy-making meeting was almost entirely hawkish. The Fed’s statement retained the language of “ongoing increases,” suggesting several more interest-rate hikes. Officials projected a higher-than-expected peak rate of at least 5% to 5.25% (with greater unanimity), higher inflation for longer, lower output growth and higher unemployment.