📈 Walking the highline.

The Fed isn’t cutting rates any time soon

November 01, 2023

We recently learned about girl math (if you return an item to a store you’ve made a profit) and boy math (5’10” is actually 6’). Over the last decade, we've been treated to a bit of Fed math: you can print unlimited money and borrowing it is free. Shockingly, we are now paying the price. Welcome to the high-rates era.

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Fed expected to hold rates but keep options open

It’s decision day at the Federal Reserve. The central bank has been on a sharp tightening cycle over the last 18 months or so, as it battles persistent high inflation. Rates are now at their highest in 22 years. Investors want to know two things: is there room for another hike, and how long will rates stay high for?

On the first question, the Fed has signaled it’s close to the top of the hiking cycle. The Wall Street expectation is that policymakers won’t move today, but they’ll keep that open if needed. That could give them a chance to see how the US economy performs and keep an eye on geopolitical risks. For example, it’s difficult to see how the war between Israel and Hamas will develop and what impact it might have on consumer confidence or oil prices.

On the question of keeping rates high, Fed Chair Jerome Powell has been firm. In September, he signaled no near-term relief. James Fishback, founder and chief investment officer at hedge fund Azoria Partners, said he expects rates to stay at or above current levels for close to two years.

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