Markets Accept Fed Will Keep Rates Higher as Economy Stays Strong, Though Inflation Outlook Uncertain
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The markets no longer expect a rate cut in March, recognizing the Fed will remain hawkish due to strong economic data showing hot inflation and a tight labor market.
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Core inflation ticked higher in December, fueled by services inflation from a tight labor market and rising wages, keeping the Fed vigilant.
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The Fed aims to tame inflation over spurring growth, and new members in 2024 may lead to an even more hawkish stance.
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It's difficult to predict inflation's path this year given economic strength but mounting uncertainty, meaning the Fed will likely keep rates higher for longer.
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The markets need to accept that higher-for-longer interest rates are here to stay until inflation clearly nears the 2% target.