• The Wharton School of Business Professor, Jeremy Siegel, predicts a volatile market if the US Federal Reserve increases interest rates by 50 basis points on February 1, 2023.
• The Federal Reserve is expected to increase interest rates by 0.25% on February 1, 2023, which will bring the prevailing interest rate in the United States up to 4.75%.
• Falling inflation, rising crypto and bitcoin prices are all factors that the Federal Reserve considers when determining interest rates.
The markets could be in for a volatile ride in the coming hours if the United States Federal Reserve (FED) increases interest rates by 50 basis points on February 1, 2023. This prediction was made by Jeremy Siegel, the Wharton School of Business Professor, who spoke to CNBC’s ‘Closing Bell: Overtime’.
Siegel believes that should the FED mention any figure in today’s meeting that is not 25 basis points, the effects would be far-reaching. He also called for a change in the wording of the FED’s statement, to expressly mention that their monetary policy decisions over the past months have been working, in order to reassure the market that they are nearing the end of their tightening cycle.
Economists expect the FED to increase interest rates by 25 basis points to 4.75%, up from 4.50%, on February 1, 2023. This follows the bank’s decision to raise interest rates since January 2022, when the prevailing interest rate in the United States was at 0.25%.
The Federal Reserve takes a number of factors into consideration when deciding on interest rates, including labor conditions and inflation. Low inflation has been seen in the United States over the past few months, and coupled with the rising crypto and bitcoin prices, could be a factor that the FED considers when determining interest rates.
Overall, the markets are expecting the United States central bank to slow down on rate hikes in the coming months, but this hope could be dashed if policymakers assess market conditions differently and decide to keep interest rates high. It remains to be seen, however, how the FED will move forward with its decisions.