The Fed Raised Interest Rates

The Federal Reserve approved a half-point interest rate hike on Wednesday (12/14/22), a smaller increase than in recent months and an acknowledgment that inflation is finally easing.

While lower than the four consecutive three-quarter-point hikes approved at the Fed’s previous meetings, Wednesday’s rate hike is still twice the size of the central bank’s customary quarter-point increase and will likely deepen the economic pain for millions of American businesses and households by pushing up the cost of borrowing even further.

The forecast will likely stoke investors’ and economists’ fear that the US economy will endure a recession next year. Federal Reserve Chair Jerome Powell said last month that there is still a chance the economy can avoid recession but said the odds are slim.

The economy has so far withstood the hikes. The job market is healthy, wages are growing, Americans are spending and GDP is strong. Business is also good: Companies are largely beating revenue expectations and reporting positive earnings results.

While the news is good now, it's safe to approach 2023 with an abundance of caution from an investor's standpoint. It's going to be a bumpy economic ride as past history indicates.