The Fed will not cut the key interest rate until 2024
- The Fed will raise interest rates three more times by 0.25 percentage points in 2023 to 5,00 - 5,25 %
- Inflation has cooled, but the Fed still needs more evidence
- The key interest rate will not be cut until 2024
- The economic outlook for 2023 is weak - unemployment is increasing
- In the stock market, there are not many drivers that would increase stock prices. An investor must be selective and patient.
The Fed raised the key interest rate by 0.50 percentage points. According to the new forecast, the market will have to endure three more increases of 0.25 percentage points. This calmed the mood in the stock market.
The Fed's decision sent stocks down. This was also the case at the November meeting, when the Fed's hawkish speech sent stocks into a tailspin. Now the shares fell immediately after the announcement of the interest rate decision. However, the decline remained fairly moderate. In a press conference, Chairman Jerome Powell said that it is important to continue the fight against inflation.
In the December interest rate forecast, Fed leaders raised the key interest rate forecast. This was to be expected, as Powell already hinted at this in the November meeting. According to the new forecast, the key interest rate will rise to the level of 5.00-5.25 percent before it starts to be cut. This would mean a total of 0.75 percentage point increase in the key interest rate. The market now expects two hikes of 0.25 percentage points in the next meetings (February and March), after which the Fed will take a break.
Conclusion
The market will have to endure high interest rates for at least another year. In addition, the economy must weaken, which is indicated by the increase in unemployment in the Fed's forecast. In the future, the investor should follow the development of the US labor market even more closely. It would have to congeal for the Fed to start considering taking its foot off the brake.
High interest rates, slow economic growth, high inflation and rising unemployment are not a good combination for the stock market in 2023. In the light of history, the stock market should be below the current valuation level. Therefore, we think it is slightly more likely stocks to drop than rise in the coming months.
In the neutral scenario, stocks will seesaw without direction at least until the first half of 2023. We think the likely range is 3800-4100 points for the S&P 500 index.
$SPX500 (SPX500 Index (Non Expiry))
We think that @II-Quality will outperform S&P 500 index in 2023. @II-Disruptive will skyrocket when the Fed hints rate cuts.... Show More
We use our own and third-party cookies on our websites to enhance your experience, analyze traffic, and for security and marketing. For more info, see our Cookie Policy or go to Manage Settings.
Privacy Preference Center
When you visit any website, it may store or retrieve information on your browser, mostly in the form of cookies. This information might be about you, your preferences or your device and is mostly used to make the site work as you expect it to. The information does not usually directly identify you, but it can give you a more personalized web experience. Because we respect your right to privacy, you can choose not to allow some types of cookies. Click on the different category headings to find out more and change our default settings. However, blocking some types of cookies may impact your experience of the site and the services we are able to offer.
More information
Manage Consent Preferences
Strictly Necessary Cookies
Always Active
These cookies are necessary for the website to function and cannot be switched off in our systems. They are usually only set in response to actions made by you which amount to a request for services, such as setting your privacy preferences, logging in or filling in forms. You can set your browser to block or alert you about these cookies, but some parts of the site will not then work. These cookies do not store any personally identifiable information.
Performance Cookies
These cookies allow us to count visits and traffic sources so we can measure and improve the performance of our site. They help us to know which pages are the most and least popular and see how visitors move around the site. All information these cookies collect is aggregated and therefore anonymous. If you do not allow these cookies we will not know when you have visited our site, and will not be able to monitor its performance.
Functional Cookies
These cookies enable the website to provide enhanced functionality and personalisation. They may be set by us or by third party providers whose services we have added to our pages. If you do not allow these cookies then some or all of these services may not function properly.
Targeting Cookies
These cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.
Cookie List
label
ConsentLeg.Interest
label
label
label
Tue Jun 24 2025 06:25:26 GMT+0000 (Coordinated Universal Time)
