Highlights
“Elevated interest rates continue to pose a concern for the U.S. economy in the 2nd quarter of 2023, with target rates reaching a 17-year high. The resulting high mortgage rates, along with a dearth of inventory, have cooled the once-hot housing market, affecting both sales and prices.”
Summary
In the 2nd quarter of 2023, the U.S. economy showed broad strength despite widely held fears that high interest rates would tip the nation into recession. The yield curve remains inverted—a sign that bond markets are primed for recession—yet production and spending exceeded expectations, and the job market remained solid. Consumer sentiment is also rising. Inflation waned a bit further, due in part to falling prices within the energy sector. The promising economic data spurred the capital markets to build on their existing rally with another bullish quarter.
Elevated interest rates continue to pose a concern for the U.S. economy in the 2nd quarter of 2023, with target rates reaching a 17-year high. The resulting high mortgage rates, along with a dearth of inventory, have cooled the once-hot housing market, affecting both sales and prices.
After 10 consecutive rate hikes, the Federal Reserve took the first pause in their anti-inflationary campaign in June. While the Fed indicated that careful monitoring of economic conditions was needed before raising target rates further, committee members revised their expectations of future target rates upward.
Despite expecting further rate hikes, FOMC members revised projections of economic growth upward to 0.95% in 2023. Growth projections for future years were reined in slightly at 1.80% for 2025. Unemployment projections were lowered for both the near and longer terms, at 4.15% for 2023 and rising to 4.45% for the next two years.