US Fed hikes rates by 50 bp, would keep hawkishthrough 2023

The US Federal Reserve slowed the pace of its interest rate hikes yesterday but indicated that it will continue to stay hawkish into next year despite clear signs that inflation has reached its peak.

The central bank raised rates by 50 bps at its final meeting of the year, a moderate increase by recent standards that brings to an end a run of four consecutive 75-bps hikes. This brings the target range of the federal funds rate to 4.25-4.5%, its highest level since late 2007.

Another 75-bps still to go? Fed officials expect rates to end 2023 at 5.1% before falling to 4.1% the year after, implying that rates will rise by another 75 bps next year. “We still have some ways to go,” Fed chair Jerome Powell told reporters at the post-meeting presser.