Live updates: Fed decision July 2023

The Federal Reserve’s rate-hiking campaign has paid off for fixed income investors.

To put things into perspective, during the week of March 11, 2022, the rate on the 2-year Treasury note was 1.75%, according to Refinitiv. On Wednesday, as the Fed’s decision approaches, it’s yielding 4.89%.

Certificates of deposit and high-yield savings accounts are also paying attractive income for investors hoping to stash their cash. A range of online banks are offering 1-year CDs with annual percentage yields that exceed 5%, and select institutions are offering yields over 4% for savings deposits.

CNBC Pro subscribers can read more about the hunt for safe yield here.

–Darla Mercado, Nick Wells

The Federal Reserve will likely need to see more softening in the labor market before it begins to trim rates, said Russell Investments strategist BeiChen Lin.

Even if the expected July rate hike winds up being the last one, key economic metrics are still looking hot, he said. “Core CPI and Core PCE rates are still above the Fed’s 2% inflation target,” the strategist wrote, referring to the consumer price index and the personal consumption expenditures index.

However, the Fed still has two more payroll reports and PCE reports before its September meeting, which may show sufficient cooling that the central bank could take a step back from further hikes, Lin said.

He likened policymakers’ expected move to hike rates after a pause in June to grilling meat.

“While you might not be able to achieve perfection, you’d rather risk burning the chicken a bit than winding up sick,” the strategist said.

–Darla Mercado

The Federal Reserve is expected to resume hiking interest rates on Wednesday, this time with a quarter percentage point increase. It would be the 11th time the central bank raised rates since it embarked on its policy-tightening campaign in March 2022.

This move would raise the benchmark borrowing rate to a range of 5.25% and 5.5%. That would be highest level of the upper-end of the range since 2001.

Though investors have been expecting this rate increase — fed fund futures show a nearly 100% certainty that the Fed will hike by a quarter point, according to the CME FedWatch Tool — they aren’t quite certain where Federal Open Market Committee officials will go from here.

On the one hand, the Fed’s dot-plot in June called for two more quarter-point hikes, but some are worried that further rate increases could nudge the economy into a recession.

Read more here about what’s coming up at the conclusion of the July meeting.

–Darla Mercado, Jeff Cox