Will Rising Interest Rates Lead to Soft Landing or Recession?

The fed funds rate is at its highest level since 2007. Modest hikes shouldn’t cause major market upheaval, but more aggressive hikes could be detrimental to the economy.

White puzzle pieces are the backdrop for a red line and successively taller red columns indicating rising interest rates.
(Image credit: Getty Images)

Editor’s note: This is part one of a three-part series about what the economy and markets could look like this year. Part two is What the Markets’ New Tailwinds Could Look Like in 2023. Part three is Five Investment Strategies to Focus on in 2023.

The year 2022 will forever be remembered as the year when the Fed, to combat the highest inflation in four decades, unwound the easy monetary policy of the past 15 years. Between March and December, the Fed raised interest rates seven times for a grand total of 425 basis points — bringing the fed funds rate to its highest level since 2007.

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Don Calcagni, CFP®
Chief Investment Officer, Mercer Advisors

As Chief Investment Officer at Mercer Advisors, Don is responsible for setting the strategic direction of the firm's investment platform, chairing the firm's investment committee, overseeing all investment-related communications, and the prudent stewardship of the firm's assets under management. His expertise is in the areas of fiduciary oversight, economics, financial mathematics, portfolio management, corporate finance, and taxation.