A year after the first rate hike, the Fed's next move in March is less certain (2023)

Higher interest rates in the future may seem like a slam dunk, but like many of life's so-called certainties, they're not.

Just a year ago, the Federal Reserve launched its first rate hike on March 16, 2022 to calm the worst inflation consumers have seen in decades. So far, through February, consumers have seen eight rate hikes.

The Fed is on track to raise interest rates for a ninth time at its next policy meeting on March 21-22. But the risk of a new financial crisis increases after March 21 and 22he suddenly collapsedSilicon Valley Bank, a California technology lender, on Friday. On Sunday, US regulators took control of New York-based Signature Bank in the cryptocurrency space.

Now analysts say the Fed is likely to delay next week and hold off on raising interest rates for now.

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It is clear that inflation has not disappeared. But the Fed's priority in the coming days will be to fight another conflagration, where stress is unfolding in large parts of the banking system. Federal regulators calmed the situation by taking emergency measures to support deposits of more than $250,000 at Silicon Valley Bank and Signature Bank of New York.

The Dow Jones Industrial Average had another volatile session on Wednesday, but rebounded at the close.

The Dow closed at 31,847.57 points, down 280.83 points or 0.87%. Wednesday's problems were based on concerns about Europe's banking crisis after Credit Suisse shares fell sharply.

Auto stocks fell. General Motors shares fell 3.57 percent, or $1.27 per share. shares, to close at $34.33 per share.

Stellantis closed at $16.87 per share, down 66 cents, or 3.76%.

Ford closed at $11.71 per share, down 22 cents, or 1.84 percent.

(Video) Fed minutes show that a June hike remains a close call, says BofA's Aditya Bhave

"The increased likelihood that banks are now tightening lending increases the risk of a recession," Sam Stovall, chief investment strategist for U.S. equities at CFRA Research in New York, said in a note on Wednesday.

Stovall told the Free Press that economically sensitive stocks, including autos and industrials, took a hit Wednesday on concerns that demand for those goods and services would fall if the U.S. slipped into recession.

The headaches of high prices continued

A year after raising interest rates, the Fed's work is not done.

The annual consumer price index rose 6% in February. This followed a 6.4 percent increase in January.

Of course, inflation eased slightly after peaking at 9.1% year-on-year in June – the biggest increase in 40 years. But the February inflation report was far from encouraging.

"Inflation is still too high for the Fed," said Gus Faucher, chief economist at PNC Financial Services Group. "Housing inflation remains very strong; we are starting to see rents fall, which should be good news."

A year after the first rate hike, the Fed's next move in March is less certain (1)

A rate hike of at least 25 basis points next week and perhaps 50 basis points is more likely, Faucher said. Now there is more room for discussion.

According to Faucher's forecast, the Fed is still likely to start raising interest rates by 25 basis points next week, and then may hold off for a while. The most recent increase in February set the target range for the short-term federal funds rate at 4.5% to 4.75%.

After a year of raising rates, the Fed managed to keep employment high but missed its inflation target, Faucher said.

Regulators' swift response to the collapse of Silicon Valley Bank and Signature Bank on Sunday helped ease concerns about widespread problems in the banking system. As a result, Faucher believes the Fed may still have room to raise interest rates slightly next week.

Other analysts expect the Fed to hold off on tightening for now. According to a report by Goldman Sachsconsiderable uncertaintyAs for the rate course the Fed will take. According to the report, current expectations are that the Fed will not raise interest rates next week, but will likely do so at the May meeting and then likely at the June and July meetings.

A year after the first rate hike, the Fed's next move in March is less certain (2)

"The Fed is likely to take a hawkish stance at next week's meeting as it reassess economic conditions," KPMG economist Diane Swonk wrote in a report titled "Stick Inflation."

"If the current crisis turns out to be temporary," she said, "the Fed will continue to raise interest rates. Otherwise, we could have a harder landing."

(Video) Minutes Show Fed Divided on Further Rate Increases

Consumers were resistant. However, consumer budgets are getting tighter these days, after more than a year of rising prices, rising interest rates and falling stock markets. The Dow Jones Industrial Average closed at 35,294.19 on March 29, 2022, a strong finish in the days following the initial rate hike, but below its all-time high of 36,799.65 on January 4, 2022.

Since its record close a year ago through March 13, the Dow has lost nearly 15.65%.

A year after the first rate hike, the Fed's next move in March is less certain (3)

It remains questionable how confident some consumers, even affluent ones, will be about their future spending. If we see more tension in the stock market, the banking system and possible future jobs, consumers may cut back on spending even if the Fed doesn't raise interest rates further.

What will happen to the interest rate?

Some interest rates — notably including mortgage and auto loan rates — are not directly tied to the short-term federal funds rate, which the Fed sets at its policy meetings. Experts say these rates are likely to fall in the coming days.

Mortgage rates, which typically track 10-year U.S. Treasuries, fell to 3.54% on Monday from around 3.97% last Tuesday, said Ted Rossman, senior analyst at Bankrate.com.

Auto loans, which tend to track five-year Treasury bills, fell to 3.68% on Monday from 4.32% the previous Tuesday, he said.

Investors poured money into U.S. Treasuries on Monday, pushing yields lower in a flight to safety amid stock volatility.

Now, borrowers could see a significant drop in future auto loan and mortgage interest rates, Rothman said.

A year after the first rate hike, the Fed's next move in March is less certain (4)

Credit cards and private equity lines of credit follow the Fed's actions more closely, so borrowers are less likely to see changes to those products soon, Rothman said.

People buying a car can expect an average auto loan rate of 6.48% for a five-year auto loan, up from an average of 3.98% a year ago, according to data released Wednesday by Bankrate.com.

Near-rising mortgage interest rates have cast a pall over the once-hot real estate market. The average 30-year mortgage rate hit 6.84% last week, up from 4.14% a year ago, according to a Bankrate.com survey.

But mortgage rates have retreated, with the average rate now at 6.66%, according to the latest Bankate.com data released Wednesday.

According to the latest Bankrate.com report, the average interest rate on home equity lines of credit — where people borrow money against their homes — rose to 7.76 percent from 3.96 percent a year ago. Such lines of credit are usually used for home improvements, paying off other more expensive debts and making large purchases.

(Video) Fed can't manage a banking crisis and fight inflation: Jim Grant of Grant's Interest Rate Observer

Some consumers are stressed

Jonathan Smoke, chief economist at Cox Automotive, said credit card and auto loan delinquencies indicate stress in some households, particularly among consumers with subprime credit scores.

"This is despite very low unemployment and relatively strong wage growth," he said.


"Consumers are juggling child support obligations," Smoke said. "And increasingly, using credit card debt seems to be part of the trick."

The cost of carrying credit card debt is too high. The average credit card interest rate is now 20.04%, up from 16.34% a year ago, according to Bankrate.com. Even more troubling, many people with low credit scores face much higher than average interest rates if they have a credit card balance or want to buy a new or used car with a car loan.

Now, thanks to the cash tax credit, many consumers can continue to spend and pay their bills to some extent. But these repayments are not as lucrative as they were a year ago.

The average federal income tax refund was $3,028 a year. March 3, according to the latest data from the tax administration. But the average fell 11 percent from the year before.

So far this year, more than $127 billion in refunds have made their way into consumer wallets, down 1.5% from the year before.

The IRS launched more refunds earlier this season, which has been a huge help to many families. As of March 3, there were a number of refunds issued earlier this seasonAn increase of 10.6 percent.

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"My guess is we'll probably see more consumer refunds after the tax refund season is over," Smoke said.

With average tax refunds down, tax refund season is unlikely to boost the economy the way it did a year ago, Smoke said.

(Video) What to Expect From the Fed This Week

"Consumers are getting less and less, and the seasonal growth in spending that we're seeing, particularly in the used car market, is likely to be substandard," Smoke said.

Demand for cars in retail fell 10 percent last year. For those buying a used car, affordability is even more difficult due to high prices and high interest rates.

"Manufacturers would rather reduce or maintain their current sales pace than risk increasing production in an uncertain economic environment," Smoke said. "They can sell more, but given the pressure from consumers, they have to lower prices and increase incentives to see a real improvement in demand."

There is still buying power in the luxury end of the car and truck market, but even that demand will disappear if a recession hits, Smoke said.

What will happen to the savings rate?

Savers are seeing solid promotions for savings accounts and long-term savings products like certificates of deposit at major credit unions, online banks and elsewhere.

The average interest rate on a 12-month certificate of deposit is now 1.62%, up from 0.19% a year ago, according to Bankrate.com data released Wednesday. but it's not hard to findOne-year promotional CD4% and 4.5% respectively.

If the Fed eases policy, we could see a decrease in interest rates, especially for five-year CDs. But some banks may continue the campaign.

Ken Tumin, Founderdeposit account, which is part of LendingTree and tracks and compares bank rates, said some savers may see certain institutions offer higher CD rates, but lower rates may also lead. Much will likely depend on the bank's strategy, the direction the Fed takes and the overall outlook for the economy.

For example, Ally Bank, which is insured by the FDIC, suddenly increased its 11-monthwithout penalty cdThe annual yield rose from 4% to 4.75% over the weekend. "This is the highest penalty-free CD rate in the country," Tooming said Monday. There is no minimum deposit. Ally called the account "easy money" on the Internet.

After the first six days of depositing money into the CD, Ally customers are free to withdraw the entire amount without any penalties for the penalty-free product, Tumin said. He points out that several online banks offer higher rates for 12-month CDs, but those CDs don't have this penalty-free feature.

Ally may have reason to get aggressive now that the bank is involvedEt MarketWatch-fragmentLast week, it was one of 10 banks that could face problems after the collapse of the SVB financial group.

"Prior to the Fed's announcement on Sunday, I think Ally was concerned that they might see a serious loss of deposits from panicked clients," Thumin said.

Ally did not respond to a Free Press request for comment.

(Video) It's our view the Fed is done with rate hikes, says JPMorgan Asset Management’s Kelsey Berro

After the Silicon Valley bank failed, Tomin says he thinks it's very importantmaybe allie decidesThis new high rate was offered to encourage customers to keep their deposits with Ally, noting that the new rate was announced on a Saturday, a very unusual time for such a change.

Frankly, much of what we do here can hardly be called routine.

Contact Susan Tompor:stompor@freepress.com.Follow her on Twitter@hram.To subscribe, visitfreep.com/special offer.


What is the date of the next Federal Reserve meeting 2023? ›

The Fed - May 2-3, 2023 FOMC Meeting.

What is the Fed rate prediction for 2023? ›

The central bank is expected to boost its benchmark rate to a range between 5% and 5.25%, reflecting an increase 0.25 percentage points, according to economists polled by financial data company FactSet.

Will Fed raise interest rates in March 2023? ›

The Fed raises interest rates again in what could be its final attack on inflation. Federal Reserve Chair Jerome Powell speaks during a news conference at the Federal Reserve in Washington, D.C, on March 22, 2023. The Fed raised interest rates again Wednesday but signalled it may be the last hike for a while.

How much did Fed hike rates in March? ›

At the Fed's last meeting held March 21 and 22, interest rates inched up 0.25 percentage point to a range of 4.75% to 5%. The spate of hikes are in sharp contrast to the height of the COVID-19 pandemic when rates hovered near zero as the economy largely ground to a halt.

Will Fed rate hikes continue in 2023? ›

BENGALURU, April 20 (Reuters) - The U.S. Federal Reserve will deliver a final 25-basis-point interest rate increase in May and then hold rates steady for the rest of 2023, according to economists in a Reuters poll, which also showed a short and shallow recession this year was likely.

Will CD rates go up in May 2023? ›

CD rates will likely increase in 2023 if the Federal Reserve continues to increase the federal funds rate. The Federal Reserve has indicated a willingness to continue increasing its benchmark interest rate to combat inflation, and this is likely to drive CD rates higher in 2023.

How many more rate hikes are expected in 2023? ›

United States Federal Reserve building, Washington D.C. The Federal Reserve will hike interest rates just one more time in 2023 before the central bank ends its inflation battle, according to its median forecast released Wednesday.

What is the implied Fed rate move for 2023? ›

The Fed's economic projections suggested that officials will raise interest rates to 5.1 percent by the end of 2023, unchanged from their December projections, before coming down to 4.3 percent by the end of 2024. As officials push rates higher, they expect both inflation and the labor market to slow.

What is the Fed rate decision for March 2023? ›

The Board of Governors of the Federal Reserve System voted unanimously to raise the interest rate paid on reserve balances to 4.9 percent, effective March 23, 2023.

Will interest rates go down by spring 2023? ›

Mortgage rates are likely to decline through 2023, although they will remain volatile as the markets react to economic data on inflation and employment. Mortgage interest rates aren't expected to dip below 6% until the second half of the year, when many analysts expect the U.S. economy to enter a recession.

Will the Fed lower interest rates in 2024? ›

The Fed penciled in a 5-5.25 percent peak interest rate for 2023, after which officials see rates falling to 4.25-4.5 percent by the end of 2024.

What is likely to happen to interest rates in 2023? ›

Are mortgage rates expected to rise or fall during 2023? The consensus is that mortgage rates will gradually decline throughout the year, even if interest rates go up.

How many Fed interest rate hikes in 2023? ›

The Federal Reserve is expected to raise the fed funds rate by 25 basis points to a range of 5%-5.25% during its May 2023 meeting, marking the 10th increase and bringing borrowing costs to their highest level since September 2007.

What happens to the stock market when the Fed raises interest rates? ›

Higher market interest rates can have a negative impact on the stock market. When Fed rate hikes make borrowing money more expensive, the cost of doing business rises for public (and private) companies.

Will there be another interest rate increase? ›

The Federal Reserve has announced nine back-to-back interest rate increases since the start of 2022. The board is due to meet May 2-3, after which it may — or may not — announce interest rate increase No. 10. For much of the past two years, interest rate increases have been a near certainty.

Will CD rates go up in April 2023? ›

CD Rates Will Likely Increase Into the Second Half of 2023

And as we get near the midway point of 2023, CD rates are increasing as well. Some banks, as of this writing, are offering yields of 5% or higher on short-term CD rates. Whether CD rates stay that high for the remainder of the year remains to be seen.

Where can I get 5% interest on my money? ›

Best 5% interest savings accounts
  • Best overall: Western Alliance Bank Savings Account.
  • Best for earning a high APY: Newtek Bank Personal High Yield Savings.
  • Best for no fees: Bask Interest Savings Account.
  • Best for easy access to your cash: Panacea High-Yield Savings Account.
May 22, 2023

What is the best CD rate for $100000? ›

Top National Jumbo CD Rates vs. Regular CD Rates
CD Bank5.01% APY$100,000
NexBank4.35% APY$100,000
All In Credit Union4.13% APY$100,000
Best non-Jumbo option: TotalDirectBank5.15% APY$25,000
46 more rows

How much will Fed rate increase in December 2023? ›

Central bankers projected in December that they would raise interest rates to just above 5 percent in 2023 — implying two more quarter-point increases after this week's move — and leave them there through the year.

What will the Fed interest rate be in 2025? ›

In the long-term, the United States Fed Funds Rate is projected to trend around 3.75 percent in 2024 and 3.25 percent in 2025, according to our econometric models.

Will interest rate go down in may 2023? ›

Mortgage rates could decrease next week (May 29-June 2, 2023) if the mortgage market takes a cautious approach to a possible recession. However, rates could rise if lenders account for the Federal Reserve taking measures to counteract inflation or if a global event brings economic uncertainty.

What will interest rates be in 2023 2024? ›

Direct Loan Interest Rates for 2023-2024
Loan Type10-Year Treasury Note High YieldFixed Interest Rate
Direct Subsidized Loans and Direct Unsubsidized Loans for Undergraduate Students3.448%5.50%
Direct Unsubsidized Loans for Graduate and Professional Students3.448%7.05%
1 more row
May 16, 2023

Are mortgage interest rates expected to go down in 2023? ›

And the Mortgage Bankers Association (MBA) is a bit more optimistic, forecasting that mortgage rates for 30-year fixed-rate mortgages will head downward in 2023 and end the year at about 5.2%.

What will interest rates be at end of 2024? ›

An interest rate forecast by Trading Economics, as of 12 May, predicted that the Fed Funds Rate could hit 5.25% by the end of this quarter - a forecast that has been materialised. The rate is then predicted to fall back to 3.75% in 2024 and 3.25% in 2025, according to our econometric models.

Will interest rates go down in 2023 in the US? ›

The Mortgage Bankers Association predicts rates will fall to 5.5 percent by the end of 2023 as the economy weakens.

What will happen to interest rates in january 2023? ›

December 2022: 0.30% January 2023: 0.33% February 2023: 0.35% March 2023: 0.37%

What is the next Fed interest rate prediction? ›

1) Interest-rate forecast.

We project a year-end 2023 federal-funds rate of 4.75%, falling below 2.00% by mid-2025. That will help drive the 10-year Treasury yield down to 2.25% in 2025 from an average of 3.5% in 2023. We expect the 30-year mortgage rate to fall from an average 6.25% in 2025 to 4% in 2025.

What is a good investment when interest rates rise? ›

Focus on dividend paying stocks

“Consider dividend paying stocks that have the capacity to increase their yield,” explained Cox. “That's a really good place to invest your money when interest rates are rising, because as interest rates rise, so will dividend yield,” he said.

What stocks to buy when interest rates rise? ›

7 Best Stocks to Buy for Rising Interest Rates
StockImplied Upside From April 19 Close
United Rentals Inc. (URI)18.9%
Phillips 66 (PSX)32.9%
SBA Communications Corp. (SBAC)22.5%
General Motors Co. (GM)102.4%
3 more rows
Apr 20, 2023

Who benefits from higher interest rates? ›

There are some upsides to rising rates: More interest for savers. Banks typically increase the amount of interest they pay on deposits over time when the Federal Reserve raises interest rates. Fixed income securities tend to offer higher rates of interest as well.

How often does the Fed change interest rates? ›

The federal funds rate is the target interest rate range set by the FOMC. This is the rate at which commercial banks borrow and lend their excess reserves to each other overnight. The FOMC sets a target federal funds rate eight times a year, based on prevailing economic conditions.

What is current Fed interest rate? ›

What is the current Fed interest rate? Data source: The Federal Reserve. The current Federal Reserve interest rate, or Federal funds rate, is 5% to 5.25% as of May 3, 2023. On May 3, the Fed raised interest rates by 0.25%, the 10th rate hike since the Fed began raising rates last March.

Will interest rates be lower next year? ›

The interest rate for a 30-year fixed-rate mortgage in the U.S. is expected to drop to 5.25% by the end of this year, according to a forecast by the financial services website Bankrate. That's 1.49 percentage points lower than the current rate, and nearly two percentage points lower than 2022′s peak rate of 7.12%.

What are the dates of the next Federal Reserve meeting? ›

Meeting calendars, statements, and minutes (2018-2023)
  • 2023 FOMC Meetings. Jan/Feb. 31-1. Statement: PDF | HTML. ...
  • 2022 FOMC Meetings. January. 25-26. Statement: PDF | HTML. ...
  • 2021 FOMC Meetings. January. 26-27. Statement: PDF | HTML. ...
  • 2020 FOMC Meetings. January. 28-29. Statement: PDF | HTML. ...
  • 2019 FOMC Meetings. January. 29-30. Statement:

Is the Federal Reserve open on 1 2 2023? ›

** Sunday - the Federal Reserve Banks and the Board of Governors are closed on January 2, 2023 and July 5, 2027.

What is the interest rate decision for the Federal Reserve? ›

The Federal Reserve hikes interest rates by a quarter point

The increase takes the fed funds rate to a target range of 5% to 5.25%. It was a unanimous decision by the Federal Open Market Committee. Read more here.

How frequent is the Fed meeting? ›

The FOMC holds eight regularly scheduled meetings per year. At these meetings, the Committee reviews economic and financial conditions, determines the appropriate stance of monetary policy, and assesses the risks to its long-run goals of price stability and sustainable economic growth.

Will the Fed lower rates again? ›

When Will Interest Rates Go Down? First, we expect the Fed to pause its rate hikes by summer 2023 (the May hike was the last one, in our view). Then, starting around the end of 2023, we expect the Fed to begin cutting the federal-funds rate.

What is the interest rate future? ›

An interest rate future is a financial derivative that allows exposure to changes in interest rates. Interest rate futures price moves inversely to interest rates. Investors can speculate on the direction of interest rates with interest rate futures, or else use the contracts to hedge against changes in rates.

How many banks have closed in 2023? ›

There are 3 bank failures in 2023. See detailed descriptions below.

Will interest rates go down in 2023? ›

Mortgage rates are likely to decrease slightly in 2023, although they're highly unlikely to return to the rock-bottom levels of 2020 and 2021.

What will the interest rate be in 2024? ›

The Fed penciled in a 5-5.25 percent peak interest rate for 2023, after which officials see rates falling to 4.25-4.5 percent by the end of 2024.

What will i bond rate be in may 2023? ›

The 4.30% composite rate for I bonds issued from May 2023 through October 2023 applies for the first six months after the issue date. The composite rate combines a 0.90% fixed rate of return with the 3.38% annualized rate of inflation as measured by the Consumer Price Index for all Urban Consumers (CPI-U).

What was the highest interest rate by the Federal Reserve? ›

The fed funds rate has never been as high as it was in the 1980s. Most of the reason why is because the Fed wanted to combat inflation, which soared in 1980 to its highest level on record: 14.6 percent.

What is prime rate today? ›

The current Bank of America, N.A. prime rate is 8.25% (rate effective as of May 4, 2023).

What will high interest rates do to stock market? ›

High interest rates tend to negatively affect corporate earnings and hence stock prices. However, different types of stocks tend to perform differently when interest rates rise. For example, growth stocks and cyclical stocks would underperform value and defensive stocks.


1. Inflation's still too high and the slow progress is concerning, says Cleveland Fed president
(CNBC Television)
2. Citi Sees 50 Basis Point Fed Hike for March: Hollenhorst
(Bloomberg Television)
3. The FED's Next Move - Decoding the Fed's Strategy
(Ken McElroy)
4. Fed Chair Powell supports 25-basis-point March rate hike
(Yahoo Finance)
5. Markets Continue to Defy the Bears
(The Real Investment Show)
6. Fed's next moves: When will asset purchases start to be tapered and rate hikes occur?
(Yahoo Finance)


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