Pricing in the futures market shows the Fed’s policy rate peaking at around 4.9% in the first half of 2023. That means there’s still room for the Fed to lift rates as it tames stubbornly high prices. In the past eight rate-hiking cycles, the Fed continued to lift borrowing costs until they were above CPI, according to Carson Investment Research.
A half-point hike on Dec. 14 would leave the fed funds rate in a range of 4.25%-4.5%. Meanwhile, Tuesday’s CPI report is expected to show the index eased to a 7.3% annual increase in November, from 7.7% the month before. But nothing is assured. Stocks wobbled on Friday after a hotter-than-expected report on producer prices.
“It’s definitely a tricky time for investors,” said Stephanie Lang, chief investment officer at Homrich Berg, whose firm recommends being defensively positioned in favor of consumer staples and health-care companies. “If history is any indication of the Fed’s track record of overshooting, that makes us cautious on equities.”
This article was provided by Bloomberg News.