What to expect as the Fed prepares its final interest rate decision of 2023
The Federal Reserve’s final interest rate decision of the 2023 calendar year is likely to include an increase in the federal funds target rate (the rate at which banks lend to each other overnight). This would be the tenth rate increase since the Federal Reserve began its cycle of rate hikes in late 2015.
The Federal Reserve’s rate hikes over this timeframe have been designed to bring its interest rate policy back to a more normalized, inflation-targeting level or to slow the economy’s overly strong growth. Given the current economic outlook and the current balance of economic activity, the Fed will likely attempt to slowly raise the federal funds target rate and return to a more normal rate-setting level. This will likely help minimize the risk of the economy overheating or raising concerns about inflation.
In preparation for its final rate decision, the Federal Reserve will review market conditions and analyze incoming economic data, hoping to gain insight into the drivers of the economy and the longer-term economic outlook. Based on these readings, the Fed may adjust its rate hike plans accordingly.
Rate decisions are events that can have far-reaching implications, both in the markets and in the broader economy, so investors should keep their eyes open for the Fed’s final interest rate decision of 2023 and the potential impacts it may have on the markets and economy.