With inflation still well above the Fed’s long-term target of 2%, interest rates will likely stay higher for longer. Also, the fast pace of GDP growth in the third quarter is expected to slow down in the coming quarters. Amid several macroeconomic uncertainties, the stock market could experience wild swings in the upcoming months.
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The Consumer Price Index (CPI), a closely followed inflation gauge, rose 0.4% in September and 3.7% from a year earlier, above forecasts for 0.3% and 3.6%, respectively. While inflation has declined from its peak in June 2022 of 9.1%, it is still well above the Federal Reserve’s 2% long-term goal.
Further, economists expect GDP growth to slow to 0.7% in the fourth quarter of 2023 and 1% over the four quarters of next year.
The Federal Reserve agreed to hold the key federal funds rate in a target range of 5.25%-5.5%, the highest level in 22 years, in its recent meeting on November 1. This was the second consecutive meeting that the Federal Open Market Committee (FOMC) chose to hold after a string of 11 rate hikes since March 2022, including four this year.
However, the FOMC indicated that there might be a final rate increase before the year-end. Moreover, as the inflation threat lingers, top economists appear to agree on one thing: interest rates will likely stay higher for longer.
JPMorgan’s chief market strategist and co-head of global research, Marko Kolanovic, said that the nation’s biggest bank is maintaining a…
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