You’d be forgiven for experiencing de ja vu with regard to our FOMC note titles: this is the second time we’ve argued this is *probably* the last rate hike of the cycle. But this time it’s for real.

Today, the Federal Reserve Open Market Committee raised its target for overnight interest rates by 0.25% to a range of 5.25–5.50% after pausing in June; the hike brings overnight interest rates to their highest level since the 2000 tech boom began deflating. At the time, those hikes helped deflate a sizable asset bubble. While it is awfully tempting to extend the analogy of the 2000’s boom to today, the fact that the Nasdaq-100 is only 6% from its all-time-highs after more than 5% of rate hikes reinforces how well-equipped the financial and real economy is in 2023 to handle higher interest rates. That, then, is the crux of the problem in evaluating Fed policy. If the growth and inflation sensitivities to interest rates are so variable, it becomes impossible to evaluate what level of rates will have an impact on the economy.


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Guy LeBas

Director, Custom Fixed Income Solutions

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