Investors should anticipate markets to “break” as long as the Federal Reserve keeps raising interest rates, according to Clem Chambers, CEO of Online Blockchain. He declared, “Something has to break if [the Fed] really does want to drive out inflation.” “There will be an almighty crash if they really mean it.”
Stocks and cryptocurrencies, which have seen significant declines in value in 2022, are allegedly in the midst of an “oncoming storm” before a major crash, according to Chambers.
Everyone recalls the significant decline in 2008. However, a bear market existed in 2007, which he described as an impending storm. “I believe the current situation could be the beginning of a storm,” David Lin, an anchor and producer for Kitco News, told Chambers.
Elon Musk previously said that the next rate increase by the US Federal Reserve will make the recession worse.
Fed has raised interest rates by 375 basis points in 2022
Since the beginning of 2022, the Fed has raised interest rates by 375 basis points. However, the most recent four rate increases were each of 75 basis points.
Jerome Powell stated that the FED is expected to raise interest rates by 50 basis points (bps) at its upcoming meeting, ending an unprecedented string of four 75-bps increases intended to combat high inflation. At the mid-December 2022 FOMC meeting, continue to anticipate a 50 basis point rate increase and a final Fed Funds target rate in the range of 4.75–5%, according to Deepak Agrawal, Chief Investment Officer, Debt Fund, Kotak Mahindra Asset Management Company.
The Fed’s rate hike from 75 basis points to 50 basis points was already anticipated. Recently released Fed FOMC minutes indicated a slowdown in the rate hike schedule.
What to Expect Ahead of This Week’s FED Meeting:
The Federal Open Market Committee (FOMC) is expected to raise interest rates by half a percentage point when it meets on December 13-14. That decision will cap off the year with seven straight increases totaling 4.25 percentage points, moves made by the Fed in just nine months a pace unprecedented since the 1980s.
The Fed is ready to start hiking rates in smaller increments
During his final public appearance before the December meeting, Fed Chair Jerome Powell confirmed the likelihood of a smaller half-point increase this month. “It makes sense to moderate the pace of our rate increases as we approach the level of restraint required to bring inflation down,” Powell said on Nov. 30 at a Brookings Institution event.
Fed chair Jerome Powell fears a wage-growth spiral. https://t.co/KKRC1tfU9e
— FORTUNE (@FortuneMagazine) December 5, 2022
Officials will reiterate that interest rates will continue to rise
Powell and company will be able to tell consumers and investors how many more rate hikes are on the table at the December meeting. Officials are expected to release new interest rate projections alongside this month’s rate decision.
In their most recent guidance, Fed officials set interest rates at a peak target range of 4.5–5%. Today, experts believe it could rise between 4.75 and 5.25 percent. However, implying that the Fed’s aggressive inflation fight could push interest rates back to levels not seen since the summer of 2006.
Powell will emphasize the Fed’s plans to keep interest rates higher for a longer period of time
The markets may not have fully digested the Fed’s plans to maintain high interest rates. Investors anticipate that rates will peak at 5–5.25% by the summer of 2023, then fall to 4.5–4.75 percent by December. This contrasts with a key speech from New York Fed President John Williams, who said in his final November speech before the December meeting that no rate cuts are planned until at least 2024.
Next week we have CPI and Jerome Powell raising rates! 👀
– CPI will be released at 8:30AM ET on the 13th (Tuesday)
– The FOMC will raise rates by x bps at 2PM ET on the 14th (Wednesday)
– Jerome Powell will have a press conference starting at 2:30PM ET on the 14th
— StockMKTNewz – Evan (@StockMKTNewz) December 8, 2022
Experts say those expectations are more than just wishful thinking; they are guided by history. At a time when a Bank rate survey of economists puts the odds of a recession by mid-2024 at 65%, most economists predict trouble for the US economy next year.
The full impact of the Fed’s rate hikes will be felt next year
The forecasts are crucial for more than just rate guidance; they give Fed officials a chance to inform investors and consumers about their projections for inflation, unemployment, and economic growth in the coming years. According to economists, rate increases don’t fully impact the economy for several months or even a full year.