We may be getting close to “the end” of the Federal Reserve’s (“Fed”) interest rate hiking cycle. This week, the Fed increased the Funds Rate 75-basis points (a basis point equals 1/100th of 1%, or 0.01%). The Fed has increased rates 3.00% since March of this year from a range of 0.00% to 0.25% to 3.0% to 3.25%. But when will the Fed stop raising rates or reach the so called “Terminal Rate”. There’s been quite a bit of talk about the “Terminal Rate”, but what exactly is it and why should you care.
According to Market Watch, the Terminal Rate is “the peak spot where the benchmark interest rate — the federal funds rate — will come to rest before the central bank begins trimming it back.” The key questions going forward are 1) how quickly Fed will get to there, and 2) how long they will stay there.
Based on the Fed’s Summary of Economic Projections, the Fed “expects”...