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New York
CNN Business
–
The Next meeting of the Federal Reserve Wednesday will be one for the history books. The Fed will either raise interest rates by three-quarters of one point for the third time in a row, to 3%, or raise them by an unprecedented full one percentage point to 3.25%.
But what happens next is anyone’s guess.
Wall Street is divided over whether the Federal Reserve will continue to aggressively raise interest rates in November, or if inflation pressures It will be cool enough To allow the central bank to slow down the pace a bit.
As such, experts’ expectations for the Fed’s short-term interest rate after the November meeting range from 3.5% to 4%. The outlook is more murky for December, with economists expecting rates to be as low as 3.75% or as high as 4.5%.
The Big problem facing the Fed: The economy still seems to be running too hot for his taste. inflation It is undoubtedly a big problem, but job market strong , Consumers are still spending In a healthy segment, housing prices are still high despite the presence of Significant rise in mortgage rates.
“This data is likely to encourage the Fed to continue over-maxing, but it also increases the likelihood that they will make a policy mistake sooner or later by tightening financial conditions too much to fight inflation,” said Timothy Chubb, Gerrard’s chief investment officer. . a report.
In other words, an interest rate increase by the Fed may eventually calm the economy more than the central bank would like.
Chubb said several large interest rate hikes could “send the economy into a mild recession”. But he does not expect a major economic meltdown like 2008. It is likely that “the economic recession of 2001 will diversify, the next less bad outcome than an unexpected soft landing.”
Even if the economy avoids a major downturn, there are growing concerns that the stock market – which has already seen a dismal 2022 – may be on its way to more pain for the long haul.
Investors have no idea where rates might be by the middle of next year, with forecasts for July 2023 ranging from 3.25% to a peak of 5%. Moreover, other central banks, especially the European Central Bank, are likely to ramp up the pace and scale of interest rate increases as well. This is likely to lead to more volatility in the market.
“The major central banks still have to do work on inflation, including the Federal Reserve and the European Central Bank. Luigi Speranza, Chief Economist and Global Head of BNP Paribas Markets 360, said in a report:
Speranza said a recession in Europe is “inevitable”. And while it may not be “deep,” Speranza thinks it will be “long.” As for the US, he said, “the overall outlook looks less negative than in Europe” but that “restrictive policy and less growth than trend is needed to tame inflation.”
It was all a rude awakening for investors, who had been hoping that Fed Chairman Jerome Powell could finally clip his wings off inflation hawks and start flapping like a monetary policy dove instead.
But unless the pace of consumer price increases begins to cool off more quickly and significantly in the coming months, the Fed will not be able to slow the pace of rate hikes any time soon. Forget about expectations that the Fed will be able to pause in 2023 and start pointing to rate cuts eventually.
The Fed, as Powell likes to say, relies on data. So far, all the data seems to point to further increases and that prices will stay higher for a longer period.
“This meeting will be very important given all the recent data,” said Roger Aliaga Diaz, chief economist for the Americas and head of portfolio creation at Vanguard. “It’s too early to talk about the hub.”
The Great Recession may have happened nearly fifteen years ago, but lawmakers still keep a close eye on major US banks to make sure these companies remain financially sound — and behave responsibly, too.
The CEOs of seven of America’s largest lenders will appear before the House Financial Services Committee on Wednesday and again before the Senate Banking Committee on Thursday. The address of the parliament session? “Accounting Big Banks: Oversight of America’s Largest Consumer-Facing Banks.”
c. B. Morgan Chase
(JPM) CEO Jamie Dimon, Citi’s
(c) Jane Fraser and Bank of America
(buck) President Brian Moynihan will testify and be subject to questions from Congress. CEOs of Wells Fargo
(WFC)Right
(TFC)PNC
(PNC) and US Bancorp
(USB) He will also be present.
Types of questions likely to appear on the tap: Do the banks, which have built up their reserves over the past few years, have enough financial protection to deal with the possibility of rising delinquencies and defaults if consumers are unable to pay their mortgage and credit card payments on time? What major banks are doing to combat growing concerns about fraud on their digital banking platform Zelle, which competes with PayPal
(PYPL) Venmo and Block
(square foot) Cash app?
Lawmakers are likely to question bank CEOs on other issues as well, including fees, predatory lending and broader concerns about the economy and the housing market.
Monday: UK stock market closed due to Queen Elizabeth II’s funeral; Earnings from AutoZone
(AZO)
Tuesday: Initiation of housing and building permits in the United States; Earnings from Stitch Fix
(SFIX)
Wednesday: Fed rate decision; US existing home sales; General Mills profits
(GIS)oh linar
(flexible)KB Home
(KBH) and Trip.com
(crumpled)
Thursday: Bank of England interest rate decision; US weekly unemployment claims; Earnings from Accenture
(ACN)Darden restaurants
(DRI)Manchester United
(Manu)Costco
(cost) and FedEx
(FDX)
Friday: UK emergency budget for energy crisis