After the eleventh interest rate increases since early 2022, inflation is down but not out, the economy is up, and unemployment is low. What’s next? The predicted first half recession did not happen and is not foreseen yet. In fact, the U.S. market is in bull territory. As of end of July after a sell-off in 2022, S&P is up 17, the NASDAQ 36 percent, and even the lagging Dow gained 7 percent.
In June, a West Coast bond trader, among others, predicted no further rate hikes. Wrong. In July, the Fed raised rates by a quarter point to 5.25-5.50 percent. And although high compared to recent lows of half a point, 5 percent is more than common, and rates were 20 percent in 1980 and 8 percent in 1990. Will there be another increase in September? Depending on inflation data, another pause may be in order but with core inflation above 4.8 percent, twice the Fed goal, the presumption is another increase is still possible.
Politics is a factor; Inflation is the top economic worry voters tell pollsters. With presidential nominations and the election within sight, expect more concern about inflation this fall.