The stock market is bracing for the Fed’s next rate hike

The content originally appeared on: CNN

The Federal Reserve is expected to announce on Wednesday yet another interest rate hike – this time, investors hope, it will be a smaller increase of a half-point rather than the three-quarters of a percentage point hike of the last four increases.

For White House officials, who refrain from commenting on policy decisions of the central bank, that half-point increase will be seen as more welcome news.

A less aggressive interest rate hike, capping a year plagued by historically high inflation, would serve as one more piece of affirmation that inflation is moderating in the US – and that Powell has taken note.

The Fed’s interest rate hikes affect everything from mortgage rates to car loans, key measures that White House officials are keenly aware have a deep impact on American consumers’ psyches and outlook about the state of the economy.

On Tuesday, the Consumer Price Index provided the latest evidence that inflation is cooling, and was particularly encouraging given that it marked the fifth consecutive month of declining US inflation.

A number of other recent economic data points have also given the Biden White House reason for cautious optimism: moderating prices including gas, car and airline prices; continued strength in the labor market; and strong GDP growth.

And while White House officials are careful to avoid predicting that inflation has peaked, President Biden walked right up to the line of saying precisely that on Tuesday.

He is “convinced,” Biden said, that prices are “not going to go up” any further.

“I’m convinced they’re going to continue to go down,” Biden told reporters.