Kiplinger’s Interest Rates Outlook: Better Economic Outlook Means Another Fed Rate Hike

By David Payne A marginally improved economic outlook likely gives the Federal Reserve the green light to raise short-term interest rates by a quarter-point at its next meeting, on July 26. Although the economy is slowing, continued strength in the labor market makes it look like any recession will hold off until 2024. Besides allowing the Fed to hike short-term rates, that is also contributing to an upward drift in long rates, with the 10-year Treasury note’s yield topping 4.0% this week. The Fed is likely near the end of its rate-hiking campaign, however. Rate projections by members of its policymaking committee and the Federal Reserve Board of Governors forecast an average of only two more quarter-point hikes before the end of the year. Fed officials indicated that rate hikes are necessary because price inflation in the non-housing services sector of the economy (known as “core services”) is stubbornly high, and bringing it down might require additional slowing of the economy and easing in the labor market. But the Fed is concerned that further rate hikes will hurt banks since rising rates cause banks losses on their portfolio of government securities. Therefore, the current cycle of Fed rate increases is likely to end sometime this year. READ FULL ARTICLE >>