The Balance Today: News You Need To Know on Dec. 14, 2022

Fed Decision Day: How High Will Rates Go?

Fed Chair Jerome Powell addressing a press conference from a podium
Photo:

Drew Angerer / Getty Images

Happy Fed Day! Today we find out how aggressive the Federal Reserve will decide to be in its fight against inflation. Yesterday gave everyone a small dose of optimism when the Consumer Price Index (CPI)—an important gauge of inflation—showed that the annual rate of inflation in November came down to 7.1% from 7.7% in October, and was lower than 7.3% that economists expected.

While the CPI isn’t the Fed’s preferred inflation gauge, the number still shows that price growth on goods and services has slowed, making it more likely that the central bank will be a little more moderate in its rate hike decision.

Anyone looking for a loan will likely welcome a smaller rate hike, since it means interest rates on mortgages, credit card debt, and more won’t go as high as they would have with another  jumbo-sized hike of 75 basis points. While higher mortgage rates have put pressure on the real estate market and caused home prices to drop a little, they still remain elevated compared to last year. 

The decision comes this afternoon, and Fed Chair Jerome Powell will give prepared remarks and answer questions from reporters. Investors will be paying close attention to what the Fed Chair says as they also look ahead to what they can expect from the bank next year.

While markets, at roughly 80% certainty, are expecting a hike of 50 basis points, worries about a potential recession remain. Higher rates tend to slow down economic activity and if the Fed continues to hike rates aggressively, it could tip the economy into a recession. 

Stocks are on the rise today as investors await the Fed decision at 2:30 p.m. ET.

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Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Bureau of Labor Statistics. "12-month percentage change, Consumer Price Index, selected categories."

  2. MarketWatch. "U.S. Economic Calendar."

  3. CME Group. "CME FedWatch Tool."

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