The Fed is expected to announce a three-quarters of a percentage point rate hike for the fourth time in a row on Wednesday afternoon. However, investors are hoping that Fed Chairman Jerome Powell will suggest that the central bank will soon “turn around” and slow the pace of rate hikes.
Those dreams can be shattered.
“I’m not convinced that Powell is backing down,” Danielle DiMartino Booth, managing director and chief strategist at Quill Intelligence, told CNN’s Alison Kosik on Wednesday’s “Markets Now” show. “The onus is on him to stay the course.”
DiMartino Booth, who has worked at the Dallas Fed for nine years, said she believes the Fed will continue to focus more on fighting inflation, especially since the labor market remains healthy.
The Fed will remain vigilant about rising consumer prices, agreed Rick Rieder, head of global fixed income investments at BlackRock.
“A pivot can be aggressive. We still have high inflation and employment that is still stable,” Rieder told Kosik.
But Rieder said this could be the last rate hike of this magnitude. That’s because past rate hikes are already having an impact on parts of the economy: “You’re seeing it in housing and soon you’ll see it in autos and other rate-sensitive sectors.”
DiMartino Booth is even more concerned about the impact of rate hikes.
“The Fed is definitely having an effect on consumption,” he said, adding that “a recession is almost a foregone conclusion.”
Making matters worse, he said, “there could be an extended period of time in which we try to cure this unusually large [rate] walking circle.”
