Greg McBride, chief financial analyst at Bankrate, said the pace of Fed rate hikes may be slowing, but the central bank “still has a tough job ahead” as it tries to bring inflation down with minimal economic pain.
“Despite lackluster economic growth in 2023, the Fed believes they can raise interest rates above 5% without unemployment rising above 5%. Optimistic? Every football coach said on Friday they would win that weekend – despite the We know half of them they’re going to lose,” McBride said in a statement.
Given historically low unemployment and decades of high inflation, it would be easy and necessary for the Fed to take aggressive steps in 2022, McBride said.
By 2023, the path will become more challenging, he added.
“Once the economy is slowing, unemployment is rising and inflation is high, it will become more difficult to raise rates,” he said. “Happy New Year, Mr. Powell!”