Fed Prepares Investors for Another Rate Hike in May

April 24, 2023

Fed Prepares Investors for Another Rate Hike in May Photo

Communication from numerous Federal Reserve (Fed) officials last week signaled a 10th consecutive interest rate increase is likely to be delivered during its May meeting. Fixed-income markets are now pricing in a nearly 90% probability of a May rate hike — up from just 25% a month ago.1

The Fed’s resolve to bring inflation closer to its 2% target remains in place despite recent turmoil in the banking system and the prospect of tighter bank lending standards. Moody’s downgrade for 11 regional banks late Friday — partly resulting from deposit outflows — represents another sign of the strains emerging from the Fed’s aggressive monetary tightening.2

This week’s economic calendar will be highlighted by our initial read on first-quarter gross domestic product being released on Thursday and Personal Consumption Expenditures Price Index out Friday.3 Corporate earnings will also be in focus, with more than one-third of S&P 500 companies set to report this week, including the resurgent tech heavyweights Microsoft, Alphabet, Meta and Amazon.4


1Yahoo! Finance – TREASURIES-Yields hit four-week highs on British inflation, Fed expectations; 4/19/2023

2The Wall Street Journal – Moody’s Downgrades 11 Regional Banks, Including Zions, U.S. Bank, Western Alliance; 4/22/2023

3MarketWatch – U.S. Economic Calendar; as of 4/24/2023

4Kiplinger – Kiplinger's Weekly Earnings Calendar (April 24-28); 4/24/2023

Tags: Federal Reserve | GDP | PCE | corporate earnings | S&P 500 | Interest Rates

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