Stocks struggle after Fed favors rate hikes

The pace of Federal Reserve rate hikes may be slowing, but “hard work is still ahead” for the central bank as it tries to reduce inflation with minimal economic pain, said Greg McBride, financial analyst at head of Bankrate.

“The Fed is confident it can raise interest rates above 5% without unemployment rising above 5%, despite weak economic growth in 2023. Optimistic? Every football coach says they’re going to win this Friday weekend, even though we know half of them will lose,” McBride said in a statement.

It has been easy — and necessary — for the Fed to be aggressive in 2022, given the historically low unemployment rate and decades of high inflation, McBride noted.

That path will be more difficult in 2023, he added.

“It becomes much more difficult to raise rates once the economy slows, unemployment rises and inflation remains stubbornly high,” he said. “Happy New Year, Mr. Powell!”

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