What Happens to Stocks if the Fed is Wrong About Inflation?

Inflation may be cooling, but it still has a long way to go to meet the Fed's target. This could keep pressure on stocks as the central bank continues to fight higher prices.

federal reserve building
(Image credit: Getty Images)

Earlier this month, the Federal Reserve raised interest rates by 0.75% to a range of 3.75% to 4%. The Fed expects rates to top out between 4.5% and 4.75% in 2023. Others, such as Goldman Sachs, believe they could go as high as 5.0% next year.

The story of why the Fed is raising rates is known to most investors. They are intended to tamp down inflation and runaway prices for everything from gas to groceries. Average Americans are feeling the pinch, too. However, in the long run, the Fed and many economists argue that the pain will be much more severe if the central bank doesn't take steps to kill inflation. 

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Will Ashworth
Contributing Writer, Kiplinger.com

Will has written professionally for investment and finance publications in both the U.S. and Canada since 2004. A native of Toronto, Canada, his sole objective is to help people become better and more informed investors. Fascinated by how companies make money, he's a keen student of business history. Married and now living in Halifax, Nova Scotia, he's also got an interest in equity and debt crowdfunding.