The pace of Federal Reserve rate hikes may be slowing, but “the hard work is still ahead” for the central bank as it tries to bring down inflation with minimal economic pain, said Greg McBride, chief financial analyst for Bankrate.
“The Fed is confident they can push interest rates above 5% without unemployment rising above 5%, despite scant economic growth in 2023. Optimistic? Every football coach says on Friday they’re going to win that weekend – even though we know half of them will lose,” McBride said in a statement.
It has been easy — and necessary — for the Fed to be aggressive in 2022, given the historically low unemployment rate and decades high inflation, McBride noted.
That path will get more challenging in 2023, he added.
“It gets a lot tougher to raise rates once the economy slows, unemployment rises, and inflation remains stubbornly high,” he said. “Happy New Year, Mr. Powell!”
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