Year-end Shocks and High Rates Heighten Recession Risk
October 2023
As expected, the Federal Reserve held rates steady at the September 19-20 policy meeting, following 11 hikes over the last 18 months that lifted short-term rates from near zero to a range of 5.25-5.50 percent. The jury is still out as to whether the central bank has reached the end of the rate-hiking cycle aimed at wrestling inflation down to its 2 percent target, a level that prevailed over most of the 20 years before the post-pandemic inflation surge got underway. As hard as it is to remember, a major concern during that pre-pandemic period was the difficulty of getting inflation up to at least 2 percent, an effort that, not coincidentally, underpinned the low-interest rate environment that had prevailed since the 2008 financial crisis.