OHIO — This week, the Federal Reserve is expected to meet to determine what happens next with interest rates. This follows the heels of the debt ceiling being suspended to 2025.

What You Need To Know

  • The expectation is that the Federal Reserve will pause the rate hike and assess where they are in the economy

  • Experts say any pause or finality to the rate hike cycle will ease pressure on the banking sector 

  • There’s a potential to see mortgage rates go down based on the Federal Reserve’s actions

Jason Jackman, CEO of Johnson Investment Counsel, said with the crisis being avoided, the deal has two things that may determine what the Fed might take into consideration.

“One was there was a modest amount of spending cuts related to discretionary non-defense spending. So on balance with the government spending a bit less than it otherwise would have that helps the Fed in terms of their inflation fight. Also in the bill was an ending of the suspension on student loan repayments, ... so those two things kind of helped the Fed in their fight against inflation. So on balance, maybe one hike less than they otherwise would have had to do," he said.

Still, with rapidly changing and unpredictable markets< Jackman expects the Federal Reserve to put a pause on the rate hike and make assessments from there.

While they are seeing inflation slow up, “We think a recession is likely in the second half of the year. So, this is a time for both businesses and consumers to not get stretched too thin in terms of borrowing. So maybe shift toward a rainy day fund and less borrowing at this time preparing for a potential recession,” Jackman said. 

While the outlook of a potential recession isn’t positive, Jackman believes “any pause or finality to the rate hike cycle will ease pressure on the banking sector and borrowers in general.” 

If there is a recession, he added that we could possibly see rates go down even on “consumer borrowing and business borrowing next year as rates move lower with the Fed battling what could be economic weakness.”

For individual borrowers, Jackman said it may mean that mortgage rates could go down, which will be a plus for many looking to buy homes. 

Correction: A previous version of this story misspelled Johnson Investment Counsel. This has been corrected. (June 12, 2023)

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