- The next step might be 50 basis points.
- More hikes are coming.
- The terminal rate is going to be higher.
- Fed is trying to give investors hope by slowing of rate hike pace but not pivoting at the same time.
- It takes 9-12 months for rate hikes to be felt and 12-18 months for the maximum effect. It makes sense to slow down the current pace given we are only eight months past the first rate hike.
- Fed will want slower total and core inflation, pullbacks in house prices and rents, slower wage growth, lower job openings, and likely an increase in the unemployment rate prior to a real pivot.
- Fed is also concerned about the upcoming winter heating season that may cause another spike in energy prices.
- Rate hikes are likely to continue into 2023 in smaller increments.
submitted by /u/Progress_8
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